Setting up a savings account...

russell664

russell664

russell664

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Hi all,

So I have been gandering at the idea of having a savings account.

Now, i'll be honest here, I have no idea what I am looking at, and am a little lost! That's why I need the help from the geniuses which are within OCUK.

So basically, I will be putting in around £100- £200 into it per month to begin with. What kind of account would be the best for this type of input. I have had a look on the Halifax website, but there are so many figures, and have no idea which one is good or bad etc...

I see things like Interest, from which I can gather over time will add a little bit to your funds.

Also TAX, I know that this is bad for a savings account as they will take money away from the account. But that is all I know at the moment.

What kind of percentages would be the best to go for, and which bank?
I'm currently with Halifax if that means anything.

Any advice would be greatly appreciated! :p
 
Is this money you need quick/easy access to or can you lock it away for a few years?

Regarding tax, if you've not used up your ISA allowance, then I'd put money in to that (if you don't need to keep dipping in to it.) Cash ISAs are poor interest but at least they're tax free so just got to compare them to standard savings accounts rates.

You can make monthly payments in to investment funds; the returns on average are higher but there is a bit of risk and they're long-term investments generally of 3-5 years or more.
If you have a mortgage, have you considered making overpayments to reduce your overall debt and saving on interest paid out?
 
POB said:
Santander 123 current account is great up to £20k.
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It is, but that's a current account with conditions to meet, like paying in £500 / month minimum and having at least 2 direct debits etc, so not really suitable in this case, and it charges £2 / month so you need at least a certain amount in there to offset that.

There are some savings accounts that pay a higher rate interest because they limit you to only paying in a certain amount / month. So over the year it works out lower than the headline rate, but still better than a straight savings account.

This is Lloyds example http://www.lloydsbank.com/savings/club-lloyds-monthly-saver.asp

Which looks great at the 4% headline rate, but over the year if you paid in £400 / month you would end up with £104 interest (gross) which works out at an actual 2.166% interest rate

Basically weigh up a normal accounts rate less 20% tax compared to an isa rate with no tax and see which is better for you.
 
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The longer you can are willing to commit you savings for the better the rate.. i.e. if you agree that your savings are locked in the account for several years, the APR will be higher.
 
Freakbro said:
It is, but that's a current account with conditions to meet, like paying in £500 / month minimum and having at least 2 direct debits etc, so not really suitable in this case, ...
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Not really suitable in this case? We don't know that.

OP - do you have a job you could pay into this? Do you have DD's?
 
Basher said:
Not really suitable in this case? We don't know that.
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Well, because he says he wants to save £100-£200 / month...

There is a way to use this account as a standalone savings account, I do it, but it's a little faff that not everyone wants to do.

I pay my wages into one account then transfer them into and out of the Santander account (to trigger the min £500 activity) I leave behind enough to cover the D/D's - which are only the ones that qualify for the 123 cashback, then I pay in the amount I actually want to save :p

Though unless he has a lump sum to put in to start with, the £2 a month fee will wipe out his interest earned anyway.
 
Freakbro said:
Well, because he says he wants to save £100-£200 / month...

There is a way to use this account as a standalone savings account, I do it, but it's a little faff that not everyone wants to do.

I pay my wages into one account then transfer them into and out of the Santander account (to trigger the min £500 activity) I leave behind enough to cover the D/D's - which are only the ones that qualify for the 123 cashback, then I pay in the amount I actually want to save :p

Though unless he has a lump sum to put in to start with, the £2 a month fee will wipe out his interest earned anyway.
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You don't need to use the Santander as a stand alone savings account, that's the whole point.

The fact that he can 'save' 100-200 a month probably suggests he DOES have an income of 500 or more - making the 123 perfectly suitable.

Out of interest, why don't you just leave all of your money in your 123 account, where it will be getting interest?
 
Out of interest, why don't you just leave all of your money in your 123 account, where it will be getting interest?
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Because I have it in other current accounts paying a higher rate of interest.

Lloyds Club - 4%
TSB - 5%
Nationwide Flex Direct - 5%

I bounce the same money through all of them ;)
 
Freakbro said:
Because I have it in other current accounts paying a higher rate of interest.

Lloyds Club - 4%
TSB - 5%
Nationwide Flex Direct - 5%

I bounce the same money through all of them ;)
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Fair enough :) I guess you have standing orders to move it all around automatically?
 
Basher said:
Fair enough :) I guess you have standing orders to move it all around automatically?
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Nah, I just do it with online banking, takes about 5-10 mins once a month.

My job involves using online banking everyday anyway, so it's not really much of a hassle to me
 
Set up an ISA

It's better in the long run, provided you are happy enough to put that £100 away every month and forget about it. In a few years you should be earning more, and should be able to put more away. Every year use your full ISA allowance, and in a few years you'll have a very tidy ISA savings account earning tax free savings.

If you need instant access and have a balance of £0 to start with, then suggestions of the Santander 123 account are pointless, as you don't start earning 3% until you have a balance of £3k.

Look at First Direct, they offered £100 for switching to their current account, then a 6% instant access savings account for £300 a month max input. They still do it http://www1.firstdirect.com/1/2/savings

£200 in a year for very minimal outlay
 
russell664 said:
So from what I can gather, applying for the Halifax ISA account would be my best bet?
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Well it depends if you are going to need access to the money as ISA's are generally best as long term savings, put as much as you can in each year and then build up a pot of tax free ISA savings. Problem is, if you withdraw the money it loses its tax free status and cant be put back in.

So with a quick look, Halifax cash ISA is paying 1.05%, so say you pay in £150 / month in a year you will get £10.24 interest (Tax free! ;))

With something like that Lloyds monthly saver at 4% and paying in £150 / month in a year you will get £39 interest less 20% tax = £31.20

The Santander 123 a/c is worth it if you have at least a £1000 balance you can immediately hold in the current account (this will cover the £24 / year charge) then use it to 'save' your £150 / month. You will have to be disciplined though, as if you are using it as a current account you have to make sure you dont 'accidentally' spend it!

Then on the £150 / month you will earn £29.25 less 20% tax = £23.40


edit : I forgot the Santander doesn't pay 3% until 3k as the above poster said, so that changes the calculation somewhat....I don't think it's really suitable for you as I initially said :p

The first direct 6% monthly saver is a good call, you probably have to swap current a/c to them, but thats a painless process nowadays
 
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Regular savings account:
First Direct gives you 4% interest.

or

ISA:
Good for long term investment, cap it each year
 
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