15k in savings - what to do with it?

Clydefrog

Hello everyone,

I'm looking for a bit of advice on what to do with a chunk of money that's been sitting in my bank account. Bit of background information first:

About my circumstances:

• Early 30s
• An annual income of around 60k.
• College lecturer so on the teacher's pension scheme + lots of freelance work
• New dad (4 month old) - mum on maternity currently
• Own a house (mortgaged, 50% equity on a 200k property)
• No debt (bar the mortgage)

About the money:

• Mostly income from freelance work - I've been trying to juggle savings accounts but these have got savings limits and only offer decent rates for a year typically.
• Whilst I don't have an immediate need for the money, I'd rather not lock it away for longer than a couple of years.
• Would prefer a happy medium between risk and return
• Around 15k currently but I should potentially be able to save between 1-2k per month going forward

Apologies if I come across as a bit clueless and appreciate it's not a significant amount of money. I'm looking for advice on how to organise any extra income so that it can grow instead of just sitting in a bank account. I considered venturing into the BTL market (e.g. by freeing up equity from our house) but I'm not sure if the climate is currently right for this. To further compound the problem, we might be looking to move abroad within the next 2 years.

Any ideas or advice will be much appreciated!

YorkshireBoy

Bearing in mind the potential overseas move, maybe stick to savings rather then investments or BTL property?

£7.5K in 3 x 5% Nationwide FlexDirect accounts.
£4.5K in 3 x 3% TSB Plus accounts
£3K in a 1.5% savings account

All the monthly income directed into 5% regular saver accounts (more current accounts required for access). In 'lean' months use the 1.5% and 3% cash to make up the loss of (some of) the freelance income.

Alternatively, bung the lot in the best 1yr/2yr fixed rate account (maybe cash ISAs?).

gary83

You say you don't want to lock the money away for more than a couple of years then say you considered a BTL?

I'd stick with your gut instinct on that, remembering that not only would you have the second home additional stamp duty to pay, you'd also have all the other costs associated with buying, then the hassle and risk associated with being a landlord and then in a couple of years time when you want to free up this money you'd have an illiquid asset that you'd have to spend more on the fees that come with selling a house.

I think you need to define how long you expect this money to be locked away for, map out a timeline for yourself & if it's genuinely only a couple of years then the usual wisdom is that's too short a period to invest and you should probably stick to the banks best offers, but even they probably won't keep up with inflation.

JohnRo

How much faffing about with opening and maintaining multiple current accounts and linked regular savers at various banks are you prepared to do?

lindylootoo

Santander - 1.5% to £20K - instant access, 2% off council tax & utility bills + 5% regular saver
HSBC - £175 switching; + 5% regular saver
First Direct - £125 switching + 5% regular saver

Various other accounts with small interest rates, but more to be made with switching and recommend cashbacks....to your wife/partner. Maintaining the accounts gets easier and it's all instant access.

Or......ISA......maybe 5% with income. Some great IFA's on here.....can recommend if you pm me.

hugheskevi

An annual income of around 60k.
New dad (4 month old) - mum on maternity currently

What measures are you taking to avoid the High Income Child Benefit Tax Charge? Some additional pension contributions could be very beneficial.

£15K seems the right sort of amount to have as easily accessible precautionary savings.

Personally, for the small returns available from regular saving accounts, and in particular having to open a new set each year, I don't bother with those and just use the Santander 123 account as a combined current and saving account, getting interest and bill cashback. Not the most efficient use, but it is straightforward.

YorkshireBoy

lindylootoo wrote: »

Santander - 1.5% to £20K - instant access, 2% off council tax & utility bills + 5% regular saver

It equates to around 1.2% after the £60/yr fee, and that's with a full £20K in there. OP only has £15K for the moment. For an all in one "instant access" account you'd be better with a clean 1.5% savings account such as Marcus and a 123 Lite for the cashback (£4/mth reduction in fee).

The Council Tax is 1% cashback with Santander. Maybe you're thinking of NatWest/RBS Reward?

Sadly they no longer offer the 5% regular saver.

fewcloudy

lindylootoo wrote: »

Santander - 1.5% to £20K - instant access, 2% off council tax & utility bills + 5% regular saver

that regular saver is now 3%...

Clydefrog

Thanks for the replies everyone. It looks like I will have to keep messing around with current accounts and linked savings. The Santander 123 account seems like the least painful option at the moment. I think it works out to about £250 profit per year in cashback & interest, including account fees.

I noticed that ISAs get a lot of attention on MSE but looking at the interest rates I'm struggling to see what's so attractive about them? I realise they're supposed to be tax-free, but they still pay less than the linked savings accounts.

What measures are you taking to avoid the High Income Child Benefit Tax Charge? Some additional pension contributions could be very beneficial.

Erm...none. Mum is claiming Child Benefit - we understand it's a good idea to do this so that the year of maternity counts towards her pension entitlement. I haven't researched this in-depth but believe that I'll have to repay everything we get anyway, when it comes to self-assessment. I also have got business costs to factor into my tax return - depending on the final figure, we might actually end up getting some peanuts for the little one.

I'm hesitant about pensions - I've currently got TPS which is where most of the money is. There's also an inactive LGPS (around 2k), NEST (around 2k) and People's Pension (around 1k). I really need to get around to rationalising these.

gary83

Clydefrog wrote: »

I noticed that ISAs get a lot of attention on MSE but looking at the interest rates I'm struggling to see what's so attractive about them? I realise they're supposed to be tax-free, but they still pay less than the linked savings accounts.

ISAs do have their benefits, although your right cash ISAs rates generally are pretty poor.

Most of us on here will be holding Stocks and Shares ISAs, that allows the longer term investments to be held in a tax free wrapper. For those of us thinking about buying a first house or locking the money away until aged 60 then help to buy ISAs or LISAs have pretty generous bonuses, who doesn't like free money?

YorkshireBoy

Clydefrog wrote: »

The Santander 123 account seems like the least painful option at the moment. I think it works out to about £250 profit per year in cashback & interest, including account fees.

£15,000 x 0.015 = £225.
Less the £60 annual fees = £165.

So for a £250 "profit" you need £85 cashback (£7.08/mth).

Now if you went with my earlier suggestion of Marcus and Santander Lite...

You'd still have your £225 interest, less only £12 in annual fees, plus the £85 cashback, giving a "profit" of £298...almost 20% more than the 123 option. Many on here have gone this way, myself included.

The other option, of course, are 1.5% cash ISAs...assuming you're (both) not already funding ISAs to the max?