Advice on savings and ISAs

EmilyInLondon

Hello everyone, 

I have recently managed to pay off some debts I had and I'm finally in a place where I can start saving consistently. According to my budget, I should be able to save around £700 a month. 

I already have a Save to Buy ISA (I opened it about 5 years ago when they announced they were going to stop the scheme), and I have £2,000 saved in there (I saved it ages ago and I just never touched it). As this scheme has ended, I will need to use the bonus by Nov 2030. 

When I was trying to pay off the debts, I also switched bank accounts to get the switching bonus and as part of this, I was able to open a savings account with an interest of 6.5% from Nationwide, which seemed like a lot. I'm only able to save £200 a month in each account, which leaves me with £300. I've got three main questions: 

• Is it a good idea to open a stocks and shares ISA for the rest? I've been thinking about this but I don't know the first thing about stocks and unsure which one to choose. 
• I'm unsure if keeping the Save to Buy ISA is the right thing to do. Should I open a LISA and transfer the money into that, if the Save to Buy ISA needs to be used up in 5 years?
• I'm also not sure if I will be able to buy my own house in 5 years which also makes me wonder whether it would be better to just put all the savings in a stocks and shares ISA instead? 

I just feel like I have a few options to consider here but I have no idea what is the best option, financially speaking. I'm 33, and I am in a relationship at the moment, but it's early days so I'm not currently planning that I will buy a house with my current partner... 

Thanks in advance!  

Altior

A S&S ISA is simply an umbrella to protect any income or capital gain being taxed. So if you are planning on investing in stocks and shares outside of a pension, and have room in your ISA allowance to do it, there's no reason not to hold it in an ISA.

The more significant choice is what stocks and shares you're investing in. The options are vast.

Typically, investing in stocks and shares is recommended for the medium/long term only, so 5+ years. 

No reason not to at least open a LISA whilst you can, with a nominal amount of money. 

Stubod

Stocks and shares are seen as long term (10 year plus). So if you think you will need the money sooner, then probably better to use the best savings account you can find rather than investing.

kimwp

I'd open another regular saver account. 

clairec666

If you're not sure about stocks and shares ISAs (which are generally best for people who know they're not going to need access to the money for a few years), you can get another regular saver account like the 6.5% you're getting at Nationwide. Have a look at First Direct and Cooperative, both at 7%, and you might be able to get yourself another switching bonus in the process.

Altior

A S&S ISA would still be good for habit forming. Just start off with modest amount 50 or 100 a month, with a view to not touching it. 

This series is quite old now but the principles still apply. And it's consumable for someone new to investing in stocks & shares.

Investing Demystified - Lars Kroijer 5 Video Series - YouTube

jimjames

EmilyInLondon said:

I have recently managed to pay off some debts I had and I'm finally in a place where I can start saving consistently. According to my budget, I should be able to save around £700 a month. 

From your numbers you don't mention anything about an emergency fund which should be held as cash. Normally it's suggested that this should be around 3-6 months worth of expenses or wages depending on your attitude and situation. Once that's sorted then it's worth looking at longer term options like S&S ISA or pension. For a S&S ISA most people don't buy shares but funds instead which invest in many, possibly hundreds, of shares so you don't need to make the choice of which ones and it reduces the risk.

EmilyInLondon

jimjames said:

EmilyInLondon said:

I have recently managed to pay off some debts I had and I'm finally in a place where I can start saving consistently. According to my budget, I should be able to save around £700 a month. 

From your numbers you don't mention anything about an emergency fund which should be held as cash. Normally it's suggested that this should be around 3-6 months worth of expenses or wages depending on your attitude and situation. Once that's sorted then it's worth looking at longer term options like S&S ISA or pension. For a S&S ISA most people don't buy shares but funds instead which invest in many, possibly hundreds, of shares so you don't need to make the choice of which ones and it reduces the risk.

Thank you! This is a very good point. Would you suggest any particular kind of savings account for an emergency fund? 

jimjames

EmilyInLondon said:

jimjames said:

EmilyInLondon said:

I have recently managed to pay off some debts I had and I'm finally in a place where I can start saving consistently. According to my budget, I should be able to save around £700 a month. 

From your numbers you don't mention anything about an emergency fund which should be held as cash. Normally it's suggested that this should be around 3-6 months worth of expenses or wages depending on your attitude and situation. Once that's sorted then it's worth looking at longer term options like S&S ISA or pension. For a S&S ISA most people don't buy shares but funds instead which invest in many, possibly hundreds, of shares so you don't need to make the choice of which ones and it reduces the risk.

Thank you! This is a very good point. Would you suggest any particular kind of savings account for an emergency fund? 

Instant access account, just find the one paying the best rate. You don't want to have an account that limits access if you need to get the money in a hurry

Altior

Nationwide RS permits 3 withdrawals in the year anyway. In fact, a number of RSs permit access without loss of interest on the applicable balance. Zopa's RS pays interest monthly for example. 

clairec666

Some regular savers can work as an "emergency fund" like Altior suggests. Read the T&Cs carefully to make sure you choose an account that allows withdrawals (First Direct, for example, locks your money in for a whole year). If you want quick access to your money, get a current account with the same provider so that money can be transferred over quickly in an emergency.