never had a savings account before...

louisa81

I've recently sorted out my finances (no more store cards, credit cards or debts. reclaimed unlawful bank charges. yay!) and have also started a regular job.

I'm looking for an account to put small payments into with a view to saving up for a holiday later in the year.

I've never had a savings account before and have no idea where to start but I have £100 to open with and want a simple account where I can put money in easily (and take it out again easily if need be)

I have looked at an online comparision site and it all looks a bit daunting to me- it's just a huge chart full of numbers and letters, none of which mean much to me:embarasse (apr? isa?)

Can anyone give me some advice on where to start?

Lokolo

Ok lets start with 2 things you are confused about.

APR = Annual Percentage Rate

This basically is the rate you will get annually. Obviously if the interest rate is paid yearly and is 6%, the APR will be 6%.

However, if you get paid 6% monthly, the APR will be something higher like 6.2% (this isn't right but i'm just trying to get the point across).

So basically when comparing different savings account you want to look at the APR rate.

ISA = Individual Savings Account

These are a type of certain account. Basically they are tax free but you can only put limited amount of money in each tax year. Until April (I think the 4th, not sure) you can put £3000 in whereas next tax year you can put £3600.

Normal savings account your interest will be taxed 20% (40% if a higher tax payer)

Do both these make sense?

Now when choosing a savings account you must consider a number of things, fixed or variable, how much, and how you want access.

Fixed = fixed for a certain period, so you know how much you will get no matter what.
Variable = follows the base rate, so can change month to month (the rates went down few months ago and are likely, I think, to go down again in the next few months).

Your amount isn't huge so I would go for an ISA as you will save from tax purposes. Fixed or variable is upto you.

Now where do you want to do it?

If you want an interenet account you must remember that it will take a few days to transfer across usually.
Branch accounts more than likely instant but rates aren't usually as good.

Hope this all helps,

Olly

louisa81

Thank you that's great advice!
I've now had a chance to read through a few of Martins articles and am definately looking at an isa.
I've also used the savings calculator to work out how much I need to save per month (£230 to save £1500 for a holiday in July)

If i'm only using my account for such a small amount of time, do all the different rates really make much difference? my cash won't even be in the account for a year.

stevedb11

Hi louisa81,
If you decide on a ISA, you can't go far wrong with the New Icesave ISA it pays 6.10%,and it only takes 10 mins to open, here's a link.
http://www.icesave.co.uk/easy-access-isa.html

EDIT, Sorry you need to open with a minimum of £1000, just re/read your post.

Hope this helps, Steve

Lokolo

Usually its only fixed rates which have a certain term. Sometimes other rates do have a minimum amount and time to have the account but most don't.

Only thing is, if interest is paid annually you will need to keep the account open, sometimes theres a minimum amount (usually just £1), until the interest is paid, then you can transfer it out and close the account. Or even, you could start saving for lets say, xmas, using the same account. And do this every year, so 6 months holiday, 6 months xmas.

Just an idea

louisa81

Oooh, great idea! I've never saved for xmas before- usually just plan to spend all of Novembers wages on xmas! (see how awful i've been with money!)

What is the best way to find the right/best ISA for me?

I'm currently looking at Egg as it was mentioned on a comparison site and is a name i've heard a lot before! not sure if that's a good sign or if i'm being sucked in by good marketing.....

Mikeyorks

louisa81 wrote: »

I'm looking for an account to put small payments into with a view to saving up for a holiday later in the year.

I've never had a savings account before and have no idea where to start but I have £100 to open with and want a simple account where I can put money in easily (and take it out again easily if need be)

If your major intent is as above then I would suggest you do not start with an ISA. They are primarily for longer term savings and not ideal for 'near to hand' money that you may want to dip into regularly. And 'fixed rate' normally requires a much larger lump sum than you quote - and ties it up (min 12 months with an ISA) for longer.

Start off with an easy access Savings account :-

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

---- then migrate onto an ISA if you find that saving is good for you! But I would still put the 'may need to dip into' into a Savings account and separate out 'I'm not intending to touch that' into an ISA.

If your not a taxpayer - don't forget you can get your interest paid gross by filing an R85 (some Banks you just 'phone)

Lokolo

Personally I diagree with Mike only because she (louisa) has said she has just started a regular job so I would suspect she is paying tax now, so I feel an ISA would be useful.

I have the Egg ISA because I have found Egg a very good bank. They also tell you how much left you have on your limit, so if you are getting close to the end you can just open a regular savings account and put a few bob in there.

But once again, its upto you.

p.s. Mike, I don't disgaree that ISAs are good for longterm savings but in this case I also suggest the ISA. I just think its a decent way she can save 20%, as she has no need to pay it.

Mikeyorks

Lokolo wrote: »

A) Personally I diagree with Mike only because she (louisa) has said she has just started a regular job so I would suspect she is paying tax now, so I feel an ISA would be useful.

I just think its a decent way she can save 20%, as she has no need to pay it.

A) Something I took strongly into account. If she's just started, 80% through the tax year, it's quite likely she is not paying ... or only on the 10% band.

The 20% is purely on the Interest. At say £100pm in a 6% account ......... we're talking £36 gross or £28.80 net. So a saving of £7.20 per year .. even if she does have to pay the full 20%. Not worth losing sleep over? And the Savings account if you're 'churning' the money a lot is much more user friendly.

Feet under the Saving's table first ... then go for the ISA once you're sorted out.

mintymoneysaver

If she has no savings at all then surely she may as well have an ISA as she is unlikely to have the £3000 to put into it long term any other way?
I don't know about the interest rate but if it's any help to you and you want to be able to get into a branch I have an instant access ISA with halifax which gives me a book which means I can put in and withdraw when needed. As I'm never going to put more than £3000 in there at the moment it suits me.
Obviously if there was ever a way to earn/ save more I would review this.

KiKi

I'm with MikeYorks here, Louisa.

If you want to quickly get money in and out, then start off with an easy access savings account.

Whilst you aren't taxed on your interest in an ISA, we're talking such small amounts here, it's not worth the hassle - as you say, the money will be in there for 6 months at the most. ISAs don't all have immediate access (can't withdraw from an ATM, for eg). Plus many ISAs - if you take money out - will impose a penalty for doing so (eg, 90 days no interest) so it's hardly worth quibbling over.

Use the link Mike gave you and have a look under "Top Earners." Seriously - save for this holiday, get into the habit then look into getting an ISA once you've sorted that.