PhD Student Saving

DaveSingleton

Hi,

I've got a bit of an unusual savings situation, and would really appreciate some pointers from you guys!

I have recently started a 3-year PhD; as such I get paid a tax-free stipend which (I think?) means that I would not pay tax on any savings regardless of what option I go for. I also do not pay back my student loan until I finish the PhD. However, this stipend (£4750) is paid quarterly. I have a few other options for extra earning, but this would be very much ad hoc and probably <£200pm. At the moment, I am with the Lloyds Graduate account - this offers interest-free overdraft of £2000, scaling down by £500 each year. However, it is also 0% interest on savings. I do not currently have any savings, but I have no outstanding debts (minus student loan). My savings target is £500pm (or deposit £1500 every 3 months).

My questions are as follows:
1) Graduate Account - would I be better going back to a student account?
2) Considering my overdraft is interest-free, would it be a good idea to take advantage of this by placing 'overdraft money' into a savings account i.e. work out a budget aiming to OD£1500 per quarter, deposit % of difference into savings?
3) What would be the best savings options? Initially looked into regular savings accounts as don't pay tax but concerned about how I would manage the regular pay in's considering I only get paid quarterly and money sitting in my current account won't earn any interest
4) Private pension - I aim to start paying into a private pension as it will be x years before I earn a 'salary'. Has anyone got any pointers towards good one's, particularly considering my quarterly-style income?
5) Access - Ideally I would like fairly easy access to a percentage of savings (rainy day fund)

Apologies for the massive post - just a few basic pointers towards whether cash ISAs/S&S ISAs etc. would be the probable better option would be great!

Thanks,
Dave

themanfromamarillo

Probably the first place to start looking is high interest current accounts. That way you can build up savings without needing to put in a regular amount every month.

Private pensions are good for tax payers and you get a 20-40% bonus from the government but since you aren't paying tax it won't be as useful.

One thing to plan for is writing up. I managed to hand in my thesis on the day my funding was up but most people I knew took at least another 6 months to finish. Some funding councils offer extra funding but it would be a good idea to have a bit in the bank to live off when your stipend stops.

Eco_Miser

Would you be able to get a normal TSB Classic Plus current account? If so, you can get 5% AER on £2000 (funded from the overdraft perhaps). It needs £500 paying in each month, but that money doesn't have to stay in the account.

DaveSingleton

Thanks - I had thought I could open a high interest current account, and then contribute to a high rate regular savings as I don't really see the point of an ISA currently.

I know exactly what you mean regarding writing up - that is the main reason that I want to retain some control over my savings as would be frustrating to have to dip into a fund right at the very end. I'm not funded by a council so no options for extra funding... my supervisor has said that he intends to have me finished well in time, but considering I can count the number of people who submitted in time on one hand, I do not want to assume! For this reason I'm steering away from S&S ISA's/straight up investments/peer2peer - partly because I just need to save and can't afford to risk money - unless anyone thinks I'm missing a trick here?

DaveSingleton

Eco_Miser wrote: »

Would you be able to get a normal TSB Classic Plus current account? If so, you can get 5% AER on £2000 (funded from the overdraft perhaps). It needs £500 paying in each month, but that money doesn't have to stay in the account.

Interesting idea... So I could open it and deposit £2000, also opening their 5% savings account. I would then create a standing order of £500 into the TSB account, with £250pm leaving into the savings account. I could then push the other £250 + any interest back into maybe another savings account - probably the Lloyds one to make less complicated? Would only initially get 1% on Lloyds, but this would build over time. Ultimate aim would be to keep my actual current account in overdraft (with a small safety cushion) as not earning anything on it anyway.

Another thought... help to buy ISAs? I could push £200 of above into this as my interpretation is that this would offer better rates than any savings option.

Eco_Miser

That looks doable - if you can save the £500 pm. The help to buy ISA looks great, assuming you can actually afford to buy at the appropriate time.

DaveSingleton

Eco_Miser wrote: »

That looks doable - if you can save the £500 pm. The help to buy ISA looks great, assuming you can actually afford to buy at the appropriate time.

That bit remains to be seen, but if it actually turns out to be lower I can still shunt £500 a month back and forth and the TSB saver/Lloyds saver/HTB ISA have small/no minimum savings requirements - from my understanding.

I'm actually saving for a house with my partner who is in a similar financial position to me (though paid monthly). We hope to have saved enough for a deposit before the 3 years; however, my understanding is that we will still get the proportional bonus should we decide to buy at any point... is that correct?

Thanks both for your help - it's really made things clearer!

colsten

DaveSingleton wrote: »

as such I get paid a tax-free stipend which (I think?) means that I would not pay tax on any savings regardless of what option I go for.

Whether you pay tax on savings or not depends on your total taxable income. You then have a personal allowance, and from April 2016 a savings interest allowance.

From April 2016, banks won't deduct any tax any longer, you won't have to pay any tax if your taxable income is below £16,800.

Before then, banks will automatically deduct 20% from any interest they pay you unless you tell them (by means of an R85) that you are exempt. You can work out whether you are with this calculator: http://www.hmrc.gov.uk/tools/r85/r85-2015.htm

DaveSingleton wrote: »

I could then push the other £250 + any interest back into maybe another savings account - probably the Lloyds one to make less complicated? Would only initially get 1% on Lloyds

Why do that when you can get 3% in a Tesco current account straight away? You can have 2 of these, and you don't need to faff about with DDs and monthly minimum payments.