Somewhere to park money for school fees

Legacy_user

Expert advice pls! I would like to open an dedicated account to pay school fees, with 2K going in each month. However, would need to withdraw every three months to may the termly fees. As the new school year hasn't started yet, at the moment we have 12K sitting in a zilch interest current account. What's your say?

Many thanks for reading this...:hello:

Aegis

Find a good online savings account. At the very least you should be looking at a gross interest rate of about 6.25-6.3% which should net you a good couple of hundred pounds a year if you started from zero.

How will the 12k be used, though? If you pay £2k per month, does that mean that it will be £14k by the time you pay the first bill, in which case is the £12k lump sum an emergency stash rather than something that will actually reduce significantly as the year goes on?

Sorry for the ignorance behind these questions, I have no idea how much your school fees actually are!

System

Hi Aegis

Sorry, should have been clearer. 12K has accumulated 12K to date. Term 1 starting in Sept will payout about 8500 of the 12K. The remaining 3500 will remain in the account (as a buffer) and will accumulate by 2000 each month until the start of Term 2, when the next 8500 will be due. Yes, kids are expensive!!

Aegis

No worries at all, I live to be confused

By my reckoning, the payout dates will be something along the lines of September (month 9), January (month 1)and April (month 4), so your account should look something like this:

08 - £12000
09 - £5500
10 - £7500
11 - £9500
12 - £11500
01 - £5000
02 - £7000
03 - £9000
04 - £2500
05 - £4500
06 - £6500
07 - £8500
08 - £10500

Now, as it stands this isn't going to work in the long run. With fees of £25500 per year and inputs of £24000 per year, you'll be losing £1500 from the process each year, which may have significant problems in April 2009 without extra inputs. Presumably this is something you've looked at already and can deal with in the long run, but if not, an additional payment of £125 per month would make this a sustainable system and would actually allow you to take out a lump sum of around £3000 now to invest in an ISA or a savings account as a buffer, but a higher interest one than you currently have.

If that doesn't work for you, you could do the same with £2500 of the money, as that won't be needed until April 2009 (as previously mentioned), so you're fairly safe to put that away for a little while.

If you decide you want to keep it all together, you should be able to find an account that will offer you rates of about 6.3% gross, which for a higher rate tax payer will be 3.78% per annum, or roughly 0.32% of the total stored in the account every month (I'm ignoring compounding for the moment), which will therefore range between £8 in April next year and £37 in December. Over the year this should come to somewhere around the £200 mark, at a guess. At the basic rate instead of the higher rate, this would be about 25% more, so if either you or your wife are at that rate, that would be the person in whose name you want to open the account.

Hopefully this is some food for thought. Remember to check anything I've said before you decide to act upon it, as I'm still fairly new to all this too

System

Thanks Aegis..future increases already noted. Seems common that most accounts I've looked at pays nil interest for the months where there is a withdrawal.

:beer:

Aegis

I think ICICI and Sainsburys allow as many withdrawls as you want/need, but that's only off the top of my head!

System

Hmmm, probs with ICICI as we have an offshore account and they don't accept transfers from it. Sainsbury's internet account is one of the ones which you lose interest the month of withdrawals. Will delve further.

Aegis

HTTC wrote: »

Hmmm, probs with ICICI as we have an offshore account and they don't accept transfers from it. Sainsbury's internet account is one of the ones which you lose interest the month of withdrawals. Will delve further.

Can you open up a UK current account specifically for such transfers?

cornerstone13

HTTC - the Sainsbury's Internet Saver account doesn't, as far as I know, penalise you for withdrawing money during the month. Lots of others do, but Sainsbury's seems to be one of the best "clean" accounts around, backed up by good customer service (no, I don't work for them, just save with them very happily !)

System

Thanks to you both for the info. I'll delve some more...