Please help me decide how to save!

Malc`

Hi, i currently have about £3000 in a barclays higher education account. I have never opened any savings accounts as I don't really know which is best, but having just earned interest on my barclays money (a grand total of...... 44p) I decided I need to set one up.

I want to be able to access it online, and deposit/withdraw when I need to. I won't be withdrawing massive quantities and a few days delay on the money doesnt bother me too much.

So far been looking at the sainsbury's internet saver which sounds promising at 6.25%, but what about an ISA? I'm not sure how ISA's work and who is best

I know this question has probably been asked a thousand times before but I really have no clue!

cadboll

Hi there!

It all depends on your situation. If you are tax-payer then a Mini-Cash ISA is an option for you. Infact its the first 'port of call'. An ISA account allows you to save up to £3,000 in the tax year (April to March) and receive interest tax-free. There are many different providers of these - you can deposit any number of amounts up to the £3,000 limit. However, once you withdraw any money, you can't then lodge an amount at a later stage to bring it up again to £3,000.

E.g. You lodge £3,000 and then withdraw £1,000. Your ISA allowance is then £2,000 for the year.

If you are going to be regularly withdrawing money then an Internet Saver account such as the one you mentioned is probably your best bet. ISA's are best left in for a period of time (1 year min usually) so that you can get the benefit of it.

Martin has a section on the site re ISA's so take a read through it - http://www.moneysavingexpert.com/savings/best-cash-isa - if you need any more help, either post a message on the site or PM me - the people on this site are fanastic and offer a lot of very good and sound advice.

Aegis

cadboll wrote: »

Hi there!

It all depends on your situation. If you are tax-payer then a Mini-Cash ISA is an option for you. Infact its the first 'port of call'. An ISA account allows you to save up to £3,000 in the tax year (April to March) and receive interest tax-free. There are many different providers of these - you can deposit any number of amounts up to the £3,000 limit. However, once you withdraw any money, you can't then lodge an amount at a later stage to bring it up again to £3,000.

E.g. You lodge £3,000 and then withdraw £1,000. Your ISA allowance is then £2,000 for the year.

If you are going to be regularly withdrawing money then an Internet Saver account such as the one you mentioned is probably your best bet. ISA's are best left in for a period of time (1 year min usually) so that you can get the benefit of it.

Martin has a section on the site re ISA's so take a read through it - http://www.moneysavingexpert.com/savings/best-cash-isa - if you need any more help, either post a message on the site or PM me - the people on this site are fanastic and offer a lot of very good and sound advice.

Nice post, but I think you need to rethink the bit in bold. If you fully subscribe to your cash ISA in a year and remove £1000, you will not be able to invest any more for the rest of the tax year.

Malc`

Very helpful post, thankyou cadboll!

I think I'm leaning slightly towards the ISA now, as I don't currently have a job but will hopefully be getting one within a month and paying tax on my earnings. I'm currently thinking of putting £3000 in an ISA then putting any extra income into an internet saver account. Does that sound like the best option for me?

Big thanks!

Aegis

Might be worth keeping some of the £3000 out of the ISA wrapper for the moment in case you need to spend anything between now and April. If you put the whole lot in and suddenly needed £1000, then you'll only be able to carry £2000 over to next tax year. On the other hand, if you put £2000 into the ISA now and kept £1000 for spends between now and then, you could top up the ISA as the year goes on, carrying through the full £3000 if you earn enough between now and April.

Your choice in the end though

cadboll

Nice post, but I think you need to rethink the bit in bold. If you fully subscribe to your cash ISA in a year and remove £1000, you will not be able to invest any more for the rest of the tax year.

Aegis - thanks for pointing that out - I meant to include that bit and then forgot, plus the sentence you highlighted in bold - E.g. You lodge £3,000 and then withdraw £1,000. Your ISA allowance is then £2,000 for the year. - doesn't really explain it well - so thanks!

cadboll

Malc'

Glad it is of help - note the correction by Aegis to my previous post.

If you haven't a job as yet - best thing to do is put the £3,000 into an internet saver account. The Sainsbury's one is probably as good as any - that way you'll get better interest than the 44p!

Then when you have a job etc - either put the full £3,000 in, in one lump sum - or put monthly deposits in.

My advice would be if you don't need the £3,000 any time soon, put it all in an ISA account (might as well get as much benefit from the tax-free status as you can). If you are likely to need some/all of it - then put some in the ISA and the rest into an Internet Savings Account.

Malc`

OK thanks again! After reading the section on Martin's website that you linked I'm going to open a cash ISA with national savings & insurance and put £2000 in now, and £500 in the Sainsbury's internet saver leaving £500 in my barclays account for shopping etc. Then when I have some income I will move another £1000 into the ISA and the rest into sainsbury's.

Cheers guys

Malc`

BTW, if I am earning interest of 6.3% untaxed in my ISA and leave just the £2000 in there for 1 year, how do I calculate how much interest I can expect to gain?

After looking at some examples its clear that its not just 0.063 * 2000

jem16

Malc` wrote: »

BTW, if I am earning interest of 6.3% untaxed in my ISA and leave just the £2000 in there for 1 year, how do I calculate how much interest I can expect to gain?

After looking at some examples its clear that its not just 0.063 * 2000

Why do you think it isn't correct?

£2000 at 6.3% is £126 which is exactly what £2000 * 0.063 is.

Aegis

If the interest is compounded daily, you need to work out the daily interest rate.

In your example, that would be 0.063/365=0.000172

After that, you add one to get the daily multiplier = 1.000172

Then you raise that to the power of the number of days being looked at = 1.000172^365 = 1.065 = 6.5% per annum.

Alternatively you could find the AER as listed in the account details! That accounts for compounding so that you don't need to go through such tedious calculations for yourself