Maxed out 123 - Where to save next?

tashalove

Hi guys,

I would like some advice on where I should put my monthly salary. I have been living extremely frugal the past few months so have been able to squirrel away most of my salary every month to max out my Santander 123 account. I have also increased my pension contributions this year as I would like to focus on preparing for retirement in the future.

I don't have any property and any debts so have started increasing my monthly contribution into my S&S ISA.

Does anyone have any suggestions or advice where I should save my remaining salary. should I start contributing more to my S&S ISA? Or should I put money in regular savers to take advantage of the high interest?

Thansk in advance.

Eco_Miser

Subject to keeping sufficient for expected and emergency expenditure in cash, I'd be maxing my S&S ISA (You've about a week to make your 2014/5 contribution up to £15k). Then there's the 6% Regular Savers, and more current accounts at 5% (TSB & Nationwide), 4% (Club Lloyds), and 3%(BOS x 3,Tesco). When, and on what, are you expecting to spend this money?

tashalove

Eco_Miser wrote: »

Subject to keeping sufficient for expected and emergency expenditure in cash, I'd be maxing my S&S ISA (You've about a week to make your 2014/5 contribution up to £15k). Then there's the 6% Regular Savers, and more current accounts at 5% (TSB & Nationwide), 4% (Club Lloyds), and 3%(BOS x 3,Tesco). When, and on what, are you expecting to spend this money?

Thanks Eco Miser. This is going to sound strange but I don't actually know what I'm saving for. This is my first job and my initial plan was to ensure that I had sufficient savings to deal with emergencies/bills. Once I had achieved that I would start thinking long term goals.

Now that I have I've kind of lost track I don't know if I should be locking my money into S&S ISAs and making a start on saving for retirement? Is it too soon? I don't have any upcoming large expenditures so am not expecting to touch the money any time soon.

bowlhead99

Everyone has their own optimum split of savings to investments to pension to current spending. You mention for example you don't have any property. If you are preparing for retirement by contributing for a pension, hopefully you will have an income in retirement. You certainly need to do that - paying 'your future self' is as important as paying today's bills. Will it be enough to pay your day-to-day living expenses and rent a place to live? Or does it make sense to buy a roof over your head rather than simply amass a big stash of cash and investments?

If you think buying a place to live could make sense, perhaps you would put more into a savings fund for that, using other high interest current accounts and regular savers in the first instance, "help to buy ISA" when available in Autumn etc. If you simply blindly contribute more to S&S ISAs because you expect them to outperform cash in the long long term, but you do in fact potentially have an intermediate goal in mind (house, car, holidays etc) on top of your £20k emergency fund, you are perhaps taking more investment risk than you should.

For all we know, your £20k emergency fund is only 4 months net pay, but it could perhaps be 24 months living expenses if you are super frugal. Even if you gave us the actual minutiae of detail of your personal circumstances we couldn't tell you what mix of S&S ISA vs pension vs high interest cash is best for you.

As a general rule
- pension is good if you are a high rate taxpayer or get more employer contribution by putting more in. Even without, we all need tax-advantaged retirement provision. It is only a bad thing if you are only getting low tax relief now, expect to be high rate taxpayer in retirement, and simply cannot afford to have money locked up until you're in your late 50s because of some pressing issue that is more important than creating the foundations of an income from age 60 to 110.

- S&S investments are good for medium to long term goals that can't wait until pension can be accessed.

- Cash savings are absolutely necessary for emergencies and for big one off expenses that enrich your life in all kinds of ways (the ability to relocate, the ability to afford a family, the ability to take a career break or retrain or simply drive a nicer car to work or go on holiday with good friends).

- Property is good because a roof over your head stops you getting cold and wet or relying on someone to rent you a place without profiting too heavily from it.

Unless there is an overwhelming need to focus on a big deficit in one of these categories, you should split your money between all of them.

Broken_Biscuits

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tashalove

bowlhead99 wrote: »

Everyone has their own optimum split of savings to investments to pension to current spending. You mention for example you don't have any property. If you are preparing for retirement by contributing for a pension, hopefully you will have an income in retirement. You certainly need to do that - paying 'your future self' is as important as paying today's bills. Will it be enough to pay your day-to-day living expenses and rent a place to live? Or does it make sense to buy a roof over your head rather than simply amass a big stash of cash and investments?

If you think buying a place to live could make sense, perhaps you would put more into a savings fund for that, using other high interest current accounts and regular savers in the first instance, "help to buy ISA" when available in Autumn etc. If you simply blindly contribute more to S&S ISAs because you expect them to outperform cash in the long long term, but you do in fact potentially have an intermediate goal in mind (house, car, holidays etc) on top of your £20k emergency fund, you are perhaps taking more investment risk than you should.

For all we know, your £20k emergency fund is only 4 months net pay, but it could perhaps be 24 months living expenses if you are super frugal. Even if you gave us the actual minutiae of detail of your personal circumstances we couldn't tell you what mix of S&S ISA vs pension vs high interest cash is best for you.

As a general rule
- pension is good if you are a high rate taxpayer or get more employer contribution by putting more in. Even without, we all need tax-advantaged retirement provision. It is only a bad thing if you are only getting low tax relief now, expect to be high rate taxpayer in retirement, and simply cannot afford to have money locked up until you're in your late 50s because of some pressing issue that is more important than creating the foundations of an income from age 60 to 110.

- S&S investments are good for medium to long term goals that can't wait until pension can be accessed.

- Cash savings are absolutely necessary for emergencies and for big one off expenses that enrich your life in all kinds of ways (the ability to relocate, the ability to afford a family, the ability to take a career break or retrain or simply drive a nicer car to work or go on holiday with good friends).

- Property is good because a roof over your head stops you getting cold and wet or relying on someone to rent you a place without profiting to heavily from it.

Unless there is an overwhelming need to focus on a big deficit in one of these categories, you should split your money between all of them.

Thanks bowlhead for the advice. You are absolutely right, I think I have been slightly caught up with wanting to blindly put more money into the S&S ISA. I might start looking up the Help to Buy ISA to help me when I want to buy my own place in the future. At the moment I don't have plans to do this (circumstances don't permit) but I am not saying its not on my list of goals.

Eco_Miser

tashalove wrote: »

Thanks Eco Miser. This is going to sound strange but I don't actually know what I'm saving for. This is my first job and my initial plan was to ensure that I had sufficient savings to deal with emergencies/bills. Once I had achieved that (20k was my target) I would start thinking long term goals.

Now that I have I've kind of lost track I don't know if I should be locking my money into S&S ISAs and making a start on saving for retirement? Is it too soon? I don't have any upcoming large expenditures so am not expecting to touch the money any time soon.

I didn't know what I was saving for either. Turns out it was for early retirement, with a house along the way.

If you know what you want, then obviously you choose the appropriate vehicles to save for it; if you don't, keep saving, spread the money around, and consider whether you should be spending a little bit now (rather than getting savings fatigue and giving up completely in a years or so).

Bowlhead has given a fairly comprehensive overview of your choices, so I won't say any more about them.

kidmugsy

I suggest you open high interest regular saver accounts after 5/4/15. That way you should get the interest after 5/4/16, thus using Mr Osborne's £1k p.a. nil rate band for savings interest. (Assuming that Mr Balls doesn't tear it up.)

AndyPK

you could put money in 3 bank of Scotland vantage accounts. That's £15K total.

Same interest rate as S123

savings_my_hobby

the help to buy ISA will be a sensible place to put your money, they wont be around for a while yet and you can put up to £200 per month away in one when they do become available, until then i recommend maxing out more current accounts, starting with TSB and Nationwide as they offer the highest returns, then in the Autumn think about the help to buy ISA.