Best options for shorter term savings? 25 October 2022 at 8:57AM in Savings & investments 29 replies 1.5K views

SPRichards

Hello,

I'm going to in a position to save a decent amount of money (to me) each month, should be a little over 2k. I've been pretty terrible with money until recently and hitting my 30s something has changed and I've been reading forums and listening to podcasts on financial advice and really want to prepare for the future. 

I would like to buy a house, and so want to save for a deposit. A lot of advice I've come across to save for a deposit seem to be longer term then I want to prepare for. Such as investment isas, where you're advised to wait at least 5-6 years before you withdraw that money. I'm hoping to be ready in a couple years, assuming I can save around 24k~ per year. 

I'm looking into regular savings accounts, as I don't have the money upfront to lock away in a 2 year fixed rate bond or similar, so I need something that I can pay into monthly. But the rates are all quite low compared to the potential gains of an investment isa. 

So yeah, I'm just looking for a little guidance or some ideas of a best approach moving forward.

Thanks in advance for any thoughts, as mentioned I'm new to this but really want to get off to the best start possible.

Cheers

Albermarle

 But the rates are all quite low compared to the potential gains of an investment isa. 

Interest rates for safe savings accounts will always seem low compared to the potential gains for risk based investment accounts. It is a fact of life- you can't have your cake and eat it !

Anyway sounds like you need to look at a cash LISA, as your first priority.

Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

Secondly what pension arrangements do you have in place ?

penners324

There are plenty of easy access savings accounts at the moment. Choose 1 that fits the bill.

Marcus for example, very easy to set up, paying 2% pa (not great but much better than nothing)

phillw

Marcus is not really market leading...

Al Rayan is 2.81% or HSBC Bonus Saver is 3% (as long as you save less than £10000 and withdraw on the 1st of the month).

If you open a Barclays Blue rewards account and have two direct debits setup, then you can save up to £5000 earning 5.12%

Daliah

Marcus would not be an easy access savings account I would point a newbie, or anyone, to at this stage as they are way off the best rates now. There's a list of easy access accounts here: https://moneyfacts.co.uk/savings-accounts/easy-access-savings-accounts/?quick-links-first=false

But the OP should also consider a LISA, as has already been mentioned. And may be consider putting some of the money into their pension.

WillowLea1962

If you don't need access to your savings then either notice accounts for 90, 120 or 180 days or fixed term savings, such as the 6 month with Atom will improve the rate of interest above that available in an instant access savings account.  Use Money facts to look at the options.  This will also show the Regular Savings accounts that might be part of the solution.  I would expect that you will be using more that one provider to get the best of each.

SPRichards

Hi all,

Thanks for the all the ideas/suggestions. 

I'm going to do a LISA for sure. I feel like most advice on podcasts usually revolve around investing, so I think that's where my head immediately went. By the sounds of everyone's advice, having multiple savings accounts and maxing out their limits is going to be the best approach. The Barclays Blue rewards and other accounts that with high interest but low maximum account balances. And then even notice accounts too. 

So would you suggest setting the account up then hitting the account limit asap (5k in the case of Barclays). THEN moving onto the next account with similar arrangement? Or would you be better off spreading the savings around among multiple early on? And letting the balances slowly build (excluding the LISA here, that will be done as the priority).

As for my pension I currently have 3 pension accounts. This is something I have been looking into. I'm going to see if I roll the smallest into my current employee pension and keep my oldest (from an old employer for multiple years) and just pay into that one myself. I haven't enacted any of that yet, just my current thoughts. 

Daliah

SPRichards said:

So would you suggest setting the account up then hitting the account limit asap (5k in the case of Barclays). THEN moving onto the next account with similar arrangement? Or would you be better off spreading the savings around among multiple early on? And letting the balances slowly build (excluding the LISA here, that will be done as the priority).

Don't overthink it. Aside from Regular Saver accounts, are very few leading savings accounts which have limits worth bothering with. I would, for instance, not bother with the HSBC 3% account as it comes with a nasty penalty if you don't withdraw the lot on the 1st of a month, and it pays little more than the current best instant access accounts. But I would, once I have used my LISA allowance, use the Barclays 5% account, even though it only pays that 5% on max £5,000. All the good remaining accounts have much higher limits, though you shouldn't go above £85k in any one financial institution. So splitting your £2k/month savings across many accounts would be overkill. However, if you do use savings accounts, keep an eye on changing rates, and move your savings as necessary. For the foreseeable future, rates are expected to be on the rise, so better offers may come along and it might be wroth moving. There is also the possibility that they will be cut again over the next 5 years.

jimjames

Depending on your bank, Lloyds regular saver takes £400 at 5.25%, YBS pays 5%. You can run multiple bank regular savers, just not more than 1 per bank.

eskbanker

SPRichards said:

As for my pension I currently have 3 pension accounts. This is something I have been looking into. I'm going to see if I roll the smallest into my current employee pension and keep my oldest (from an old employer for multiple years) and just pay into that one myself. I haven't enacted any of that yet, just my current thoughts. 

Pension provision shouldn't really be measured by the number of pensions you have but how much is in them!  Transferring between schemes is sometimes worth doing but it'll depend on scheme rules and individual circumstances, etc, so isn't really a target in itself....

Albermarle

To add to the above, how pensions are invested is also more important than how many pensions you have.
Also the minimum contributions for pension ( 5% employee and 3% employer) are inadequate for building up a decent sized pot. Some employers and employees add substantially more.