Starting to save

geeovana

Hi,
I’m currently 26 years old (as of 5th sept.) and I have just graduated university. I have got a job as a mechanical engineer at an American oil and gas company (based in the U.K.) and I have a basic starting salary of 40K. I have worked out crudely that it will be closer to 47.5 – 50K with bonus, allowances, overtime here and there etc. etc.

I have been terrible with money in the past and want to start taking things a little more seriously. I am currently reading a few books on investing (Not to become a pro overnight) but more to get into the financial mind frame and understand the pitfalls advantages of where to put your money.

I plan to save hard for the next few years and aim to save 10K every year with an ambitious idea to add an extra 1K every year. So 10k in year 1, 11K in year 2, 12K in year 3, you get the idea. This doesn’t sound too absurd to me taking into consideration increases in salary after grad programme, chartership, etc etc.
I am currently renting with my girlfriend and my parents want to help me out with a deposit for a house so that is a big financial burden taken care of. I obviously plan to give back whatever they give me but it would be quite helpful when it comes to it in a year or two.

Now my questions begin with where would you begin to look to put this kind of money? And would it be completely unrealistic to expect a yearly return of 5% interest?

I am completely new to this and ready for a torrent of lol’s but I’m hungry to learn and ready to start taking it seriously.

With me paying higher tax already in my job how does taxation work on interest?

Thank you for any help in advance
Regards,
Graeme

Archi_Bald

1. you need a cash emergency fund to start with - best kept in one or more interest-paying current accounts. Make that 6-12 months salary
2. you need some cash for furniture/furnishings/white goods (unless your parents pay for all this as well)
3. you should maximise your company pension - thereby probably also staying a BR tax payer for longer. £50K gross salary should be no reason for having to pay HR tax.
   You can also put any extra money you may have into a SIPP.
4. anything that you can put away for more than 7-10 years should go into an S&S ISA

How much you put into each category depends on how much you might need when.

Thrugelmir

geeovana wrote: »

Now my questions begin with where would you begin to look to put this kind of money? And would it be completely unrealistic to expect a yearly return of 5% interest?

If you are saving the deposit for a property. Then are you prepared to risk capital in the short term? Markets can dip suddenly. Separate long term saving i.e. pension from short term.

GTR_King

Try TSB Classic Plus 5% interest on £2000 or less
Santander 123 4% on balance on £3000/£5000

they have good interest

xylophone

Pay enough into your company pension to keep below the higher rate threshold.

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

Consider the Santander 123 account

http://www.santander.co.uk/uk/current-accounts/123-current-account

and later at the TSB and Lloyds current accounts to save your deposit and emergency funds.

When you can, consider using your stocks and shares ISA allowance.

http://monevator.com/category/investing/passive-investing-investing/ worth a read as an introduction.

Archi_Bald

GTR_King wrote: »

Try TSB Classic Plus 5% interest on £2000 or less
Santander 123 4% on balance on £3000/£5000

Santander 123 pays 3% on £3K to £20K

Eco_Miser

For your emergency fund, and planned spending over the next 7 years, use current accounts(start with the highest interest and work down as you fill them) and Regular Saver Accounts.
That will take care of around 5 years worth of savings at your proposed rate. Keep an eye on here, and elsewhere for changes in rates offered, and possible new strategies for optimising interest.
For longer term savings I second Archi Bald.

Al.

As suggested, start saving for an emergency pot. Consider suitable protection for when/if you can't work or have dependent and are dead or can't support them. It's far cheaper when you're young.

Identify your life objectives; retirement, house, car, travel etc and save/invest into each - the tactics might be different for each. Short term objectives, save; longer term ones, consider investing.

This is from my personal blog last week, it might be useful. It might not be! Good luck.

http://www.alrush.biz/the-secret-of-her-success/

atush

I agree, join your company pension to remain a BR taxpayer, and save emergency fund and other cash into current accounts.

geeovana

Thanks for all the responses, nice to be able to talk to people in the know

Will definitely take on board about the emergency fund and the current accounts. So is it fine to have multiple current accounts and savings accounts with multiple banks?

I'll start sifting through and looking for the best accounts to start with.

That blog is interesting although I cant access anymore of it??

Archi_Bald

geeovana wrote: »

So is it fine to have multiple current accounts and savings accounts with multiple banks?

It is fine, absolutely, and many people have had multiple accounts for many years.

It's very smart, in fact, to have accounts with different financial institutions, just in case any of them run into trouble - RBS, HSBC, Nationwide all have had operational troubles in the recent past, and no bank is immune to occasional failures.