So payday for me is next week and I have calculated that I might have a good lump of money spare each month now that I am out of my overdraft so I want to start saving it.
I don’t have any savings accounts and tbh I’ve never had the option to save so this is new territory for me.
What I want to do is to split my savings into thirds effectively. One third goes into an easy access account like Marcus where I can dip in and out if I need to for emergency and build a 3 month emergency fund.
Another third is saved specifically for special occasions (birthdays and Christmas, probably going to use Pots for this)
The other third I want to put into a long term fixed savings account with higher interest. Best I have found is Atom at 2.05% for the year https://www.atombank.co.uk/fixed-saver.
I guess I am just after some advice with regards to the long-term savings. Is it possibly worth opening a 2 year or 3 year fixed account? Or should I do something else? My pension is quite low so should I increase that (no added benefits from my company) or should I try something different?
Any advice on either third is welcome, as I am open to suggestions.
You’ll surely get a healthy response to your important question. One comment from me - as you don’t specifically mention it. I’d plump for an ISA somewhere in your longer-term a planning. Protect it from the tax man.
A lot of ISA products allow withdrawals and some allow you to return the withdrawn funds to the account within the same tax year. Much more flexible these days.
Just my opinion.
If there no top up from your company for your pension, I’d look at this later.
I personally wouldn’t think about your emergency fund as something to dip in and out of. A lot of it is about how you think. Keep it as a true emergency fund would be my advice.
I’ve found pots useful for saving up for specific things. Especially think like saving over change from transactions. I have a pot that fills up over the month and then I put that money into a LISA for example.
An ISA is good as mentioned above, however if your actual savings are low you’ll make more money putting it in higher interest accounts and then moving it into an ISA once they’ve matured.
What I would suggest is keep your money in ‘Instant Access Savings’ (such as Marcus, Monzo Pots or other quick access savings) until you’ve built up a buffer of at least 1.5 months wages/salary/income - only then start looking at ‘locking’ money away for longer (if it’ll take longer than a month to withdraw the money, then have at least 3 months buffer in instant access). Personally, I feel the recommendation is at least 3 months income ‘instant access’ (24 hours wait is okay) before locking things in.
The last thing you want is for something to happen (job loss, major car repair etc), having the funds to resolve the issue - but not being able to access them for weeks or months.
I don’t want to think of it as something to dip in and out of monthly. I was thinking more of if my car breaks down and I need to pay the voluntary excess or something like that.
My pension I literally am paying the minimum in as is my company and I only started it about a year ago when forced to opt in. So it is on my mind but not at the forefront right now.
Very much agree with this. You want to build a buffer first, the best thing to do is have a good attitude about it. It might be instant access, but you shouldn’t touch it unless it’s a true emergency (ever).
There’s also the usually highly recommended UK personal finance Reddit flow chat. Maybe someone can link it?
I think I’ve already got that from another forum post printed two copies and shoved one in my wardrobe and one in my daughters room.
Have you seen this?
I found this diagram particularly helpful!
I thought most savings up to a certain amount were also tax free meaning that ISA’s aren’t as highly regarded as they once were?
Love that…printing that off too…
you can never get your ISA allowance for the year back though when / if your circumstances change to more income from savings you have lost that years allowance for tax free savings
They are interest is tax free up to a poin £1000 for low tax bracket? I think.
So an isa makes sense for things like stocks and shares as they are long term, a life tome isa if your buying a house for example, or to dump your money out of a regular saver which usually reset every year. You can usually get savings accounts with higher interest that aren’t ISAs
However. You probably don’t want those fixed rate savers atm as you’ll want access (I.e emergency fund) so an isa may still be on the table
Your savings can quickly add up, so you’ll end up with an isa at some point
You might want to look at RateSetter or some of the other peer-to-peer lending platforms. RateSetter is currently quoting a 3.9% rate for 1 year fixed savings at the moment. As well as this, RateSetter are also offering a £100 bonus if you lend £1000 for at least a year. This gives an effective return of 13.9% on a £1000 deposit in the first year which I think makes it worth considering at least.
I’d spilt monthly savings into thirds but:
1/3rd into pots for birthdays etc
2/3rds into Marcus (or other easy access savings account)
Marcus contains roughly three months salary.
At that point I would look again at where the best place for the other two thirds would be. Be it an ISA or a fixed rate account.
But I think if you have no buffer, it’s important to build that first before locking money away.
I also wouldn’t fix for longer than a year at this point in time, as rates are so low. There’s not much room for further drops, and you wouldn’t want to be fixed at a lower rate when they’re rising again.
Disclaimer: I am not a financial advisor
Quite right - but there’s no indication of current available funds so I assumed the worst (or best )
Just remember with an Atom fixed save you can’t add to it either. It’s only really good if you have a set amount that isn’t going to grow ready to earn savings on.
Ah I wasn’t aware of that. I literally just checked the rates and didn’t investigate further.