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  • FIRST POST
    • StorageBox
    • By StorageBox 10th May 18, 8:06 PM
    • 2Posts
    • 2Thanks
    StorageBox
    Savings strategy for a reasonable lump sum
    • #1
    • 10th May 18, 8:06 PM
    Savings strategy for a reasonable lump sum 10th May 18 at 8:06 PM
    Hi,
    My 1st post, so hello everyone.

    I've had a lump sum of 170,000 in a high street bank account earning a pathetic 0.2% for the past 6 months. I really want and need this to be working much better for me.

    My situation: I'm 49, living on my own, renting (saving a load of by doing so)
    - no family.
    - no intention of buying property for the moment
    - don't want the money hidden away for years & years, so 2 yr fixed rate is probably the very most I'd be looking at
    - I'd want *some* capital to be accessible to upgrade my car and pay for holidays and emergencies and maybe furniture for a new place sometime in near-ish future
    - I've always wanted to invest in Stocks & Shares but no idea where to start
    - I'd like to boost my monthly income in an accessible way
    - I can probably also save about 100/month from my salary

    My initial idea is this:
    (1) put 140-150k into a 1 year fixed rate account eg Investec at 1.9%
    (2) put the remaining 20-30k into an Easy Access Cash ISA and have the interest from the Investec account paid into the Cash ISA.
    BUT.... (stupid question)... is it not better to keep the interest in the Investec account so that the interest is compounding?

    Thanks
    SB
Page 1
    • Alexland
    • By Alexland 10th May 18, 8:42 PM
    • 3,101 Posts
    • 2,436 Thanks
    Alexland
    • #2
    • 10th May 18, 8:42 PM
    • #2
    • 10th May 18, 8:42 PM
    Welcome to the forum,

    I don't really understand how you are saving money by renting but for most people owning a property provides security particularly as they approach retirement when their income usually falls such that they can no longer afford rent. Personally in your position I would consider buying a property with the aim that any mortgage is fully repaid by your target retirement date.

    In terms of investing regular income into S&S usually nothing beats a workplace pension for both tax relief and employer matched contributions.

    Alex.
    • StorageBox
    • By StorageBox 10th May 18, 9:08 PM
    • 2 Posts
    • 2 Thanks
    StorageBox
    • #3
    • 10th May 18, 9:08 PM
    • #3
    • 10th May 18, 9:08 PM
    Welcome to the forum,

    I don't really understand how you are saving money by renting but for most people owning a property provides security particularly as they approach retirement when their income usually falls such that they can no longer afford rent. Personally in your position I would consider buying a property with the aim that any mortgage is fully repaid by your target retirement date.

    In terms of investing regular income into S&S usually nothing beats a workplace pension for both tax relief and employer matched contributions.

    Alex.
    Originally posted by Alexland
    Hi Alex, thanks for your reply. I've deliberately not explained my full circumstances. I could easily buy a property, mortgage-free, right now if I wanted, but I don't want to.. I got divorced earlier in the year and buying a property right now just isn't for me. And yes, I have a decent workplace pension, notwithstanding the sizeable chunk I've had to forgo as part of the divorce settlement.
    • xylophone
    • By xylophone 10th May 18, 9:29 PM
    • 26,482 Posts
    • 15,723 Thanks
    xylophone
    • #4
    • 10th May 18, 9:29 PM
    • #4
    • 10th May 18, 9:29 PM
    put 140-150k into a 1 year fixed rate account eg Investec at 1.9%
    You are unconcerned about FSCS protection?

    https://www.moneysavingexpert.com/savings/safe-savings

    http://www.thisismoney.co.uk/money/article-1621507/Best-savings-rates-Fixed-rate-accounts.html

    If you want to make a beginning with stocks and shares ISA you might try regular monthly contributions here

    https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

    http://monevator.com/using-vanguard-lifestrategy-funds-life/

    Had you considered current accounts for your emergency money - a Nationwide Flexdirect, a TSB Plus and a couple of Tesco current accounts (providing you have the DDs)?

    Nationwide also offers the 5% regular saver.
    • Alexland
    • By Alexland 10th May 18, 9:42 PM
    • 3,101 Posts
    • 2,436 Thanks
    Alexland
    • #5
    • 10th May 18, 9:42 PM
    • #5
    • 10th May 18, 9:42 PM
    If you can buy somewhere nice outright for 170k then that's great as it wouldn't go far around here! If you are planning to save in below inflation cash accounts there is the risk that your spending power is erroded and you may no longer be able to afford the same standard of property in future. Sure have a bit of freedom for now but keep an eye on how much time you are out the market.

    In terms of your question savings interest is calculated by the day and compounds during the year however saving providers publish Annual Equivalent Rates (AERs) to enable comparison between products regardless of the interest payment frequency.

    https://www.moneysavingexpert.com/banking/interest-rates

    So to maximize the benefits of compounding you want as much money as possible in the account with the highest AER on any given day. Subject to you accepting any access limits imposed by the account T&C's.

    Good luck,
    Alex
    • BLB53
    • By BLB53 10th May 18, 9:52 PM
    • 1,372 Posts
    • 1,148 Thanks
    BLB53
    • #6
    • 10th May 18, 9:52 PM
    • #6
    • 10th May 18, 9:52 PM
    I've always wanted to invest in Stocks & Shares but no idea where to start
    The better returns are provided by equities over time but they can be a bit volatile and you will need a decent timeframe to get a decent return. I suggest for starters get hold of Edwards' book 'DIY Simple Investing' which will give a good introduction and should help you to assess whether you should give it a try.

    Another option if you do not want to diy is the Robo Advisors such as Nutmeg, Moneyfarm etc. who will roughly work out your risk profile and then suggest a ready-made portfolio...for a % fee.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • mark13
    • By mark13 10th May 18, 10:06 PM
    • 289 Posts
    • 131 Thanks
    mark13
    • #7
    • 10th May 18, 10:06 PM
    • #7
    • 10th May 18, 10:06 PM
    Seems like a safe strategy. Max the easy access ISA.. Save the rest across providers to ensure you have FSCS cover. I'd also max bank accounts such as Tesco & TSB. Every little helps. Next year max the ISA again.
    Personally instead of cash ISA I'd have stocks and shares.
    Win Dec 2009 - In the Night Garden DVD : Nov 2010 - Paultons Park Tickets :
    • Thrugelmir
    • By Thrugelmir 10th May 18, 10:31 PM
    • 59,778 Posts
    • 53,120 Thanks
    Thrugelmir
    • #8
    • 10th May 18, 10:31 PM
    • #8
    • 10th May 18, 10:31 PM
    You can park the money in the NSI earning 1% for instant access. While deciding what to do.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • rathernot
    • By rathernot 11th May 18, 7:19 AM
    • 279 Posts
    • 76 Thanks
    rathernot
    • #9
    • 11th May 18, 7:19 AM
    • #9
    • 11th May 18, 7:19 AM
    Look at NS&I products, decent returns given they're 100% government backed, and instantly accessible albeit with an interest penalty on some products.
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