After advice and tips.

loken152

Hi all, just a quick back round for you. Me and my wife are currently working towards being debt free (apart from the house). After a few years of us being a little free spending and me making a few bad choices. We shall be out of debt in 12-18 months and we plan to be start to save again.

We have used a good chunk of saving to pay some of the debt off, we now have what i call our emergency fund 6 month worth of house bills. We don’t want to use any more of this. We have always saved for our children, both under 5. We have recently changed the accounts to children ISA’s that pays 3.25% and can’t be accessed till they reach X age. We have saved £20 a month into each of them. We have a plan for when we are out of debt to save and i would like some feed back from others on what they think.

1 To have a saving account to purchase future cars say every 5 years. Not sure what type of account to go for? A cash ISA that only pays 1%, a regular savers that pays 5% or a stock and shares ISA that pay much higher?
2 A account to use a piggy bank to save for holidays and car maintenance. I plan to use a cash ISA for this.
3 To open a Stock and shares ISA for long term savings, for our future plans and retirement. ( we both already have pensions.)

Any tips and advice would be appreciated.

bowlhead99

1)a regular saver is perfect for this, and as you have probably noticed, the rates are several times as high as ISAs. The timescale for using S&S investments is way too short, because if you build up the amount from nothing over 5 years by dripping in every month, the money is only invested on average amount two and a half years (the first pound, 60 months, the last pound, 1 month). Over 2.5 years it is a complete gamble whether you make or lose money on s&s investments. So don't do that if you need a car.

2) there is not a lot of point using a cash ISA if high-interest current accounts pay more. You don't have much money and you are not keeping the money there for even the medium term. For these little bits of day to day savings you won't be earning as much as £2000 interest a year between two of you (the threshold for paying tax on savings interest) and might as well use high interest current accounts. If your emergency savings fund and car fund combined gets really big, you might start to pay tax. But earning 3% and paying tax on it is still better than earning 1% tax free.

You mentioned you are not really ready to start saving yet because you still have debts to pay. You can assess the state of the high-nterest current account market again in a year's time but at the moment it is good.

3) yes, sounds sensible.

CLAPTON

loken152 wrote: »

Hi all, just a quick back round for you. Me and my wife are currently working towards being debt free (apart from the house). After a few years of us being a little free spending and me making a few bad choices. We shall be out of debt in 12-18 months and we plan to be start to save again.

We have used a good chunk of saving to pay some of the debt off, we now have what i call our emergency fund 6 month worth of house bills. We don’t want to use any more of this. We have always saved for our children, both under 5. We have recently changed the accounts to children ISA’s that pays 3.25% and can’t be accessed till they reach X age. We have saved £20 a month into each of them. We have a plan for when we are out of debt to save and i would like some feed back from others on what they think.

1 To have a saving account to purchase future cars say every 5 years. Not sure what type of account to go for? A cash ISA that only pays 1%, a regular savers that pays 5% or a stock and shares ISA that pay much higher?
2 A account to use a piggy bank to save for holidays and car maintenance. I plan to use a cash ISA for this.
3 To open a Stock and shares ISA for long term savings, for our future plans and retirement. ( we both already have pensions.)

Any tips and advice would be appreciated.

makes no sense to save for the kids (or anyway if you both have jobs) when you are in debt
use the money to clear the debts and make it up to the kids later

anyway better to save in S&S if the kids are young