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Bank Account or ISA for savings (maxed out LISA)?

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I'm 23 years old and have recently been awarded £8500 compensation money. I'm planning on buying a house within the next 3-5 years so after a lot of research I opened a Lifetime ISA with Skipton. I've paid £4000 into that ISA (max for this year) and plan to transfer another £4000 into the LISA next year, giving me a maximum government bonus of £2000 +interest for the 2 years.

However, as the maximum I can pay into the LISA is £4000 p/a, the rest of my compensation money (+ any other savings I will hopefully accumulate in the next year) need to be put elsewhere for the next 2 years or so.

My current banking situation is as follows:

  • HSBC current account - The bank that my compensation money is currently living in. I've had it since I was around 12 years old and will close it once I've moved my compensation money
  • HSBC Cash ISA - Used for a month or so when I was a teenager - requested to close today
  • Nationwide FlexDirect Account - Used as a general house account whilst I was at uni. Currently using this account for all standing orders/direct debits, salary payments etc. Plan to close this account when I find a better solution to storing my money
  • Nationwide Cash ISA - Again used for a month or so when I was a teenager - requested to close today
  • Santander Student Account - Not used for anything anymore other than the 0% interest £1500 overdraft
  • Monzo Bank Account - I used this account as my main current account (sort of). My salary gets paid into my Nationwide FlexDirect Account monthly, which I then split into 4 and pay into my Monzo Account weekly. This helps me to not overspend each month. Everything I need to buy I purchase with my Monzo card

It's probably obvious that I wish to close most of the banks above. I plan on keeping my Santander Account as it's very useful to have the overdraft. I will also be keeping the Monzo account as I've been with Monzo for a couple of years now and like how they operate. My plan is as follows:

  • Close the banks I don't need
  • Have salary/direct debits/standing orders set up in a new bank account(?)
  • Store lump sum(compensation money)/savings from new bank account in a new savings account/ISA(?)
  • Each year pay £4000 from my savings account/ISA into my LISA
  • Continue to split my salary weekly and pay into my Monzo Account

My problem is that I don't know which accounts I should be using as a current account or a savings account. I'm happy to start completely from scratch, and I'm really hoping someone can point my in the right direction. Another slight problem may be that my 'salary' isn't really a salary. I'm currently designing a mobile app which is in the pre-funding stage. My 'salary' is being paid by an investor (after he's paid tax on the money) into my bank account each month. As I'm technically unemployed (soon to be self-employed I hope) I've struggled with credit checks in the past (I attempted to get a one time use credit card to facilitate hiring a car abroad, but failed).

I feel like my situation is fairly unique and I really don't know where to begin, so any advice would be hugely appreciated. There seems to be a huge array of options but I don't know what would benefit me the most. I've read nearly every single guide on this website about savings but am still pretty clueless.

(I previously asked this question in the Savings forum but haven't received many replies on the c/a front - so I thought this forum may be more appropriate)

Many thanks in advance,
Joe

Comments

  • Katiehound
    Katiehound Posts: 8,125 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    First of all think carefully before closing any current accounts.
    Why?
    Because you could be using these for the switching bonuses- if nothing else.

    At the moment current accounts are generally paying more interest than savings accounts but we are talking small amounts spread over quite a lot of accounts. Also most of these accounts require a minimum monthly payin (not a problem as money can circulate by SOs) and a certain number of DDs (harder)
    check t&cs for pay ins & DD requirements

    Tesco x 2 - £3K each earning 3% (3 xDDs each?- not sure - mine are older a/cs)
    TSB £1.5k- earning 3% .2 x DDs earn £5 pm (I think)
    Club Lloyds & 3 x BOS with Vantage. All up to £5K earning 2% . 2 x DDs each
    Nationwide Flex Direct- £2.5k earning 5% for 1st year, access to 5% RS
    HSBC Advance- access to RS- 5%

    HTH
    Being polite and pleasant doesn't cost anything!
    -Stash bust:in 2022:337
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  • Kim_13
    Kim_13 Posts: 3,432 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper Photogenic
    You may find this MSE guide to where to start saving useful: https://www.moneysavingexpert.com/savings/which-saving-account

    As you've already had the Nationwide FlexDirect, you won't be able to use it to get 5% on £2,500 for a year, due to recent terms and conditions changes preventing customers from ever having a second round of the promotional rate. It does however entitle you to hold a Regular Saver with them paying 5% on up to £250 per month, so it may still be worth keeping.

    As another poster said, you should utilise any accounts you don't want to get a switching incentive rather than just closing them.

    Consider either the Natwest Reward account or the Santander 123 Lite to earn cashback on household bills. The Natwest one pays 2% on household bills for £2 per month, while Santander pays tiered cashback between 1 and 3% for £1 per month. If most household bills aren't in your name or you wouldn't earn enough cashback to justify the monthly fee, the TSB Classic Plus (limited time only for new customers), Halifax Reward or Co-op with Everyday Rewards will give you a reward/cashback payment for paying out any 2 (4 if Co Op) direct debits.

    The MSE guide to the best bank accounts gives further information: https://www.moneysavingexpert.com/banking/compare-best-bank-accounts
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