Student- Where should i Save? 30 September 2007 at 11:13AM in Savings & investments 4 replies 585 views

fatman_2

Hi all,

Read a few articles and threads here, quite alot of information to take in, and can be difficult to workout what is better. Got a couple of questions I hope some more experienced members can answer.

I'm currently a FT student with about £100 per month to save, and interested in the stock market, and wondering if buying shares in a few companies is wise with this amount of money each month available. Any recommendations for stockbrokers that would suit regular buying/selling for this amount of money would also be appreciated. Alternatively, would a savings account be better?

Secondly, Will any interest earned be taxed? , or can It be reclaimed back?

Thanks,

Digi

Lokolo

£100 a month isn't really enough for buying shares. ~£12.50 will go when you take out one set of shares leaving you only with £87.50. You can always save for a few months then buy some.

I am a student myself wooooo, but I put my student loan into an ISA. But you are only saving £1200 a year (with an ISA you put a max of £3000 a year, tax free, so when you are older and paying tax you won't pay tax on this). You could either do this or just put it into a regular savings account.

Tax wise, you will be taxed (depending who you bank with, Egg let you declare it yourself). But you will be able (most probably) to claim it back, it really depends how much income from a part time job you've earnt.

Any questions?

CLAPTON

If you are interested in learning about shares I would suggest to set up a 'fantasy' portfolio of shares so you can see how you would get on without any actually risking any real money. There are lots of sites that run these .. you could try www.iii.co.uk
You have to register but its free.
For actual share dealing you typically pay £10-15 each time you buy or sell plus there is a buy/sell spread so using 100 is not realistic as the charges are proportionately too high.

With 100 a month spare you had better build up some cash savings which will give you freedom to travel or whatever later.
Either put it in an ISA which is tax free or a savings a/c. If you use an ordinary savings account ensure you fill in a R85 which means the interest is paid tax free... it is possible to get between 6-6.4% with instant access and internet management.

CLAPTON

also .. about tax

You can have taxable income (i.e. earnings plus gross interest on saving but excluding student loans or ISA interest) up to 5225 this tax year (6th April 2007 to 5th April 2008) without paying tax.
If you are taxed by an employer then you will need to write to the HMRC and claim it back.

caliston

Because you'll be hit quite hard by dealing charges for such small sums, you could look into investing in 'funds' instead. Here someone else picks the shares for you according to some theme (eg European companies, US property, etc) and takes 0.3-2% of the investment each year for their trouble. But it's cheaper because the dealing charges are spread over the thousands of people rather than you having to pay them upfront. Your investment is also spread across more companies than you'd be able to afford yourself.

On the other hand, The Motley Fool Sharebuilder offers a way to reduce dealing charges to about £1.50 a go, if you aren't bothered on which day exactly the shares are bought (they pool all the requests and only buy a few times a month). There's been mixed feedback on the customer service, but it might be a useful option. It's worth checking what the selling fees are for any dealing option - these aren't so heavily advertised but are just as important.

CLAPTON is right though, it's worth first building up a pot of easy access savings first for unexpected expenses (say you move house and need a deposit, or get a summer job that means you need to buy a car, etc) - while it is possible to cash up shares at short notice, you might find you need the money at just the wrong time (immediately after a sharp drop, such as this August, for example). Once you've got enough of a cushion then it's easier to take the long view about shares.