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Where would you save this money?

(25 Posts)
yetanotherdeskmove Mon 13-Mar-17 13:38:33

We are in the very lucky position of having £1k to save every month from next month onwards. We plan to put £200/m as overpayment on the mortgage and then the rest into some sort of savings account as we have no long term savings.

Where would be the best place to put these savings, would it be one of the current accounts that bear interest (which is my current plan) or is there a better idea?

yetanotherdeskmove Mon 13-Mar-17 13:42:48

or would we be better changing the proportion of money going to the mortgage vs savings and splitting it say 50/50? Our interest rate is 2.29 fixed till June next year.

zzzzz Mon 13-Mar-17 13:44:29

I'd put it in the mortgage.

MadeForThis Mon 13-Mar-17 14:08:35

Over pay the mortgage.

reallybadidea Mon 13-Mar-17 14:15:15

What's your pension like? You can make up to 40k contributions a year and get the tax back on it - if you're a basic rate tax payer that works out at an extra 25% straight off.

JoJoSM2 Mon 13-Mar-17 15:53:58

I'd second the pension idea once you have an emergency cushion.

StripeyDress Mon 13-Mar-17 15:58:01

Pension

Eatingcheeseontoast Mon 13-Mar-17 16:01:16

ISA if you are in the UK.

Pension.

Have a look at martyn lewis money saving expert website.

yetanotherdeskmove Mon 13-Mar-17 17:13:01

Pensions we will definitely look at once we have a safety cushion yes. I don't want to put it all on the mortgage as I want to have some cash savings, doesn't have to be easy access though as we have short term holiday/ car maintenance savings started already.

foreverlost Mon 13-Mar-17 17:17:16

If you already have a healthy emergency stash, put most on the mortgage. Best interest rate you'll get. Have a look at some mortgage overpayment calculators... the amount you save is huge.

yetanotherdeskmove Mon 13-Mar-17 17:29:59

We have no emergency stash, that's what I want to create grin

foreverlost Mon 13-Mar-17 18:03:54

Do you foresee any immediate emergencies? Although I appreciate that's hard to predict!

I would honestly split 50/50 and that's what I do with my spare cash. If you get into trouble you can stop the mortgage overpayment easily/put money on interest free card and pay it back.

GeekyWombat Mon 13-Mar-17 18:12:26

Emergency stash into premium bonds (if you register online you can get it out in 48 hours and while you're not getting interest savers aren't getting much anyway and you could win a million).

Once you're happy with that I'd look at mortgage overpayment, pensions and the new lifetime ISA thing longer term (as long as you're under 40 when you start it you can save up to £8k a year, the government gives you 25% a year on top. You access as a lump sum on retirement.

JoJoSM2 Mon 13-Mar-17 18:12:41

If you need to have a stash then either a savings account. For a part of it you could consider an ISA but cash ISAs have terrible interest. Stock and shares ISAs could go up or down so might not work if you need money when they've just dipped. However, once you've got some emergency money, pensions are great as they come out of gross earnings, 25% is tax free when you withdraw and they can be inherited tax free.

yetanotherdeskmove Mon 13-Mar-17 18:19:39

Forever no we don't foresee any, but you never know do you!

We've been stupid with money in the past and have only now finished paying off the last of our debt, so it feels important to us to have a fund. We are lucky to have a good income but nothing to show for it.

Sadly we are just the wrong side of 40 for that ISA.

I think we will go for 50/50 mortgage / savings, so will have a look at where to put the savings.

yetanotherdeskmove Mon 13-Mar-17 18:23:07

I hadn't thought of premium bonds as haven't they just cut the amount of winners? But yes I guess you still have a chance of winning!

I've also just remembered that I recently switched to M&S bank and they do a monthly saver for current account holders that pays 5% interest for 12m up to £250/m so makes sense to use the max of that allowance.

I'm just rambling now grin

GeekyWombat Mon 13-Mar-17 20:24:27

Up until recently I had £8k of premium bonds (half that since my boiler broke). In the four years I've had it I've won £50 six times. I figure as an interest rate it's ok smile

greathat Mon 13-Mar-17 20:27:30

Can you get an offset mortgage, put it into an account but have it count towards the mortgage in terms of interest repayment?

Go on moneysavingexpert site and ask there though...

JoJoSM2 Mon 13-Mar-17 20:58:47

GeekyWombat, that's less than 1% annually with the inflation higher than that = you actually lost money.

nannynick Mon 13-Mar-17 23:03:24

Your emergency fund will lose money. It is an emergency fund, fairly easy access, not an investment. View it more like insurance, it costs you money (in this case it costs you inflation rate - interest rate you get).

An interest paying current account, a savings account or premium bonds are all suitable, they offer low rates of return but have fairly fast access and don't risk losing the capital itself.

Then with money above the emergency fund, you can pay off the house and invest in retirement. Retirement is pension and things like stock&shares ISA. It is investing for the future, with the hope of a greater return by the effect of compound interest and stock market gains. It can be volatile, so it is a long term investment - at least 5 to 10 years and probably longer.

GeekyWombat Tue 14-Mar-17 06:12:19

@JoJo My Halifax savings account is at 0.5%. I'm happy taking a punt smile

JoJoSM2 Tue 14-Mar-17 07:36:54

IMO I don't think you need to necessarily lose money. I've got emergency money + other long-term investments/savings in the stock and shares ISA wrapper. It's spread across a range of funds so that the portfolio is well diversified (exposure to different markets, sectors etc). If I needed to access some of it, I could cash in whichever fund was up at that time. Obv it only works if someone has more than just the emergency pot to invest.

yetanotherdeskmove Tue 14-Mar-17 14:48:44

Greathat I can't move the mortgage till June next year or I pay a redemption fee. Happy to over pay it though which I am good no yo do with half the money.

Then £250 a money into the 5% savers I get with my m&s current account (the max you can pay) and I've discovered I can get a first direct one at 5% as well with my first direct account so the other £250 can go in there.

They both last a year so will think again once the year is up.

Thank for your advice everyone.

BarbaraofSeville Thu 16-Mar-17 09:16:54

There's also the Tesco current account that you can put £3k in at 3% pa. You can also get the same with TSB and a £5 monthly bonus for having 2 direct debits (TV licence is easy to move online and you can set up a small monthly DD to a Tesco savings account). 3% interest is more than your mortgage interest rate, so you're profiting from doing this and can still access the money when you want to.

Overpaying the mortgage is all well and good but most don't allow you to get the money back if you need it. I wouldn't bother with premium bonds until you have a decent amount of cash savings such as £10k. The chance of winning big is tiny, less than the lottery.

Look on moneysavingexpert for an up to date list of regular savings and current accounts that pay decent interest. and information about all the tricks to meet the minimum monthly funding and direct debit rules easily.

Santander 123 current account is a good one to have because even though the 1.5% interest isn't the best, it is payable on up to £20k and most people will get enough cashback on bills to cover the monthly £5 fee - we get at least £4 each month and our bills are much lower than average (Band A council tax, no pay TV, total mobile phone costs less than £20 pm). People with more average bills will get a lot more - maybe £10-15 pm.

specialsubject Thu 16-Mar-17 09:44:51

Tesco are currently closed to new applications, martin lewis blew the gaff. The real interest rate on monthly savers is half what is advertised. Inflation is already over 2% - the basket they use to calculate it is ridiculous.

All cash savings lose money but you do need an emergency cushion so build that first.

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