Any advice on how to split savings across accounts/investments?

avs0110

Hi, I'm rather new to the forum, an avid reader but first time poster so please bear with if I make any mistakes! I'm just after a bit of advice on how to split my savings across regular savings accounts, ISAs, investing etc.

I currently have about £1800 sitting in an easy access savings account from Chip earning 1.25% (£2000 is the max for a free Chip account, otherwise it's £1.50 a month to hold up to £5000).

I have a further £2000 in a S&S ISA from Wealthsimple, I had normally put in about £100-£150 each month pre-coronavirus but I do have more capacity to save since the pandemic due to other cuts in spending elsewhere.

I have a HTB to which I contribute £200 every month.
I also have a regular savings account from NatWest earning 3% where I contribute £50 every month (this is the cap).

I also have £2400 in a Nationwide current account which was earning a higher interest rate but will revert back to the much lower regular rate this month (0.35% I think). I was essentially using this account as a savings account and transferring the minimum money in and out to maintain the rate. 

I also have a couple of the rounding up/autosave apps and just transfer the savings into one of the above periodically.

My monthly income is £2,000 after pension contributions and work share scheme. I'm due a pay increase in September of this year, I couldn't predict how much but it would be an increase of at least £8k pa (quite likely more).

My living costs pre-corona were at roughly £1k monthly with upto £400 for entertainment etc but I was definitely pretty reckless with the spending (I am now actively cutting down on the unnecessary spending). Not much of a 'planned' spender in that if I wanted to book a holiday for example I'd just book with whatever was in my account rather than taking money from an allocated holiday pot.
Currently monthly living costs are considerably lower hence the increased capacity to save.
I have no outstanding debts other than a student loan. I do 99% of my spending on a credit card (for the points!) and pay it off in full every month.
I am 23 and would like to buy property in the next decade (alone, not with partner). Preferably in London but I am aware that these bonuses apply to new builds/have a £450k cap so I may end up looking outside of London and therefore purchase sooner than if I were to hold out for London.

I'm looking at ISAs for both long and short term saving but I'm not sure if my approach is correct. I'm also not 100% sure that my knowledge is accurate, I've done a fair amount of reading but mostly confused myself it seems! I have a rough idea of what sort of saving I should be doing but some guidance would be great.

I have a few questions but absolutely any advice would be really appreciated!

Would a cash LISA or S&S LISA be my best option?
Is it possible to hold one of each if opened in different tax years and is this a good idea? From what I understand I can hold one of each but only contribute to one in each tax year. So one account each year would have no deposits, still benefit from interest, but may also have fees to pay in the case of S&S?

Of the S&S LISA options out there, what would ultimately be the better option long term? I'm more of a passive investor, I'm happy to just contribute and leave it alone, with a mid to high risk appetite (as long as I don't have to play around with it myself!)
I've taken a look at HL and AJB and cannot figure out what would be my best option in my financial situation. AJB seems to have higher transactional fees and I have seen recommendations for bulk deposits to minimise individual trade costs. But the overall recommendation seems to be HL for passive investors. Nutmeg and Moneybox seem to rank below the other two but I'm open to anything. I would be comfortable contributing the full £4k into a S&S LISA each year and reinvesting the bonus. Ultimately I'd like the process to be as passive as possible but of course willing to do whatever is best/necessary.
Should I be looking at opening a regular cash ISA as well? From what I've seen they're all roughly the same but I may be missing something.

Should I be looking at putting money away for a 1 or 2 year fixed term? Again rates aren't amazing but I do have the capacity to lock away lump sums at present, and the trajectory for interest rates seems to be downward.

Are there any other savings options I should be looking at? I'm conscious that with limited knowledge I might be missing something obvious.
I have looked at a longer notice savings accounts, e.g. 95 day notice with Moneybox but the rate is only 0.6%, however there isn't a £2k cap like with Chip.
Is it a good idea to have several savings accounts with varying ease of access and rates? Or better to just lump everything into one or two savings/investment accounts?
Are premium bonds something to consider or is this a waste of time?

I'm not saving for anything in particular other than a house and a safety net or something to dip in to if I needed to make a one off large purchase. I would like to have a bit saved up for travelling in the next 5 years (a longer period of 3-6 months travelling so I would not be working) but nothing particularly short term like a car, holiday etc. I do have a decent work pension scheme but am conscious about saving for old age on top of this as well (better to start saving earlier etc.)

I'm trying to be in control of my finances a little more but am aware that I've been rather cavalier about it up until now! Given that April is approaching I just wanted to get ahead of it now and do what I can to make the most of the remaining benefits of this tax year ahead of the fresh allowance.

Any advice or help would be much appreciated! I hope I've provided all the relevant information but more than happy to share anything else of relevance.

Thank you in advance (and apologies for the very long post!)

El_Torro

Your post certainly is long Still, it's refreshing to see someone try to give as much information as they can. 

I think your first step is to understand the difference between saving and investing. Essentially savings are for money you know you're going to use in the next 10 years. Investments are more suitable when invested for at least 10 years (often used to save for retirement). 

For your savings you need to know how much you need for a house deposit (I'm assuming you're planning to buy in 10 years or less). On top of that it's a good idea to have an emergency fund (for house repairs, unexpected lay off / redundancy, etc...). For your savings, in the current environment I would say that if it's up to £50k then just stick it in Premium Bonds. There are ways to get a less than terrible interest rate by using fixed rate accounts, regular savers, etc... but in my view Premium Bonds are almost as good and a lot less hassle. This of course might change if interest rates change. For buying a house there are other options too, like a LISA.

Once you know what you have left to invest you need to decide where to put it. A Stocks & Shares ISA? Your pension? Somewhere else? Which option you choose depends on your circumstances and preferences.

Finally once you know where you're putting your investments you need to decide what to invest in. A global multi asset fund is a good idea for most people, and there are many threads in this forum which talk about the best ones, the differences between them, etc... Some independent research on your own part wouldn't go amiss. I can't recommend any specific books for you but www.monevator.com is a website that helped me a lot when I started out.

Albermarle

Yes it is a bit too detailed but I can add a couple of points to the above .
If you have cash savings then you can earn up to £1000 in interest tax free if you are a basic rate taxpayer . So for most people cash ISA's are redundant and non ISA savings accounts usually pay a bit more interest than Cash ISA's. Of course if you buy Premium Bonds all winnings/returns are all tax free anyway.
I do have a decent work pension scheme but am conscious about saving for old age on top of this as well (better to start saving earlier etc.)
Normally if you are saving for retirement , pension is the best bet. There are tax advantages and of course in a workplace pension there are employer contributions . If you are a higher rate taxpayer and/or your contributions are made through a salary sacrifice arrangement then even better. If you are in a DB scheme even better still ( although outside the public sector, these are getting rarer)

DireEmblem

It sounds like you are fairly astute financially, but here's something for you - have a look at the fees with wealthily, and what they invest in.  There are a couple of newcomers recently - Nutmeg, Weathify... but overall, do their investment options track or beat a global equity tracker?  The answer generally after fees is no.

Google how many individual investors can beat a generic index tracker, and how many funds can beat a tracker.  The numbers certainly were not what I expected when I looked.

The first thing with investing, is to understand your goals, what are you trying to achieve, and how long are you able to invest for, without needing to withdraw funds.

You sound like you are quite young, so one thing I would suggest is ask yourself this - would you miss something you have never had?  In this respect I am talking about your pension.  Check out what your current company offers in terms of pension contributions, and the long term returns you could potentially have if you max these out.

zemarcopolo

Because you haven't bought a house yet, it may be more prudent to focus on the deposit money first. Therefore, saving for pension although carries a tax advantage,  wouldn't be the best thing to start with.

LISA would be my first target for deposit. After hitting the maximum annual LISA allowance,  then I would look at premium bonds due to their easy access to cash in.

I would concentrate on those two until I get a mortgage, after which I would then look at other investments like stocks and shares ISA, IFISA and pension savings. 

Peterrr

Given your desire to buy property, I agree with previous on LISA - max this out, and only contribute to your pension to the extent that you maximise any employer 'matching' contributions. Once you have your property and/or are a higher rate tax payer then you should re-focus in this area.
I disagree with the recommendation for premium bonds - although accessible, the rate of return really isn't good.

Albermarle

I disagree with the recommendation for premium bonds - although accessible, the rate of return really isn't good.
There is no easy access savings account offering a better average return than Premium Bonds .