If have 5k in a savings account. Is it worth moving?

[HalloumiChips]

I have 5k in a basic savings account. Is it worth moving, and if so where to?

Depends on the rate. You may be able to get 1% somewhere but rates on instant access cash are really low everywhere.

What is the £5k for - is it your emergency fund? Is it destined for something you are specifically saving towards? Consider your long term goal... do you need this money kept safe? If so then interest rate is not a concern, you want safety.

1% on £5,000 is £50 a year.

A small fraction of that is an insignificant difference.

Safety and easy access are probably more important.

Thanks for the replies. It's a basic savings account that I put money in for Christmas, holiday spending money, that sort of thing. The money has built up to more than it would normally be and I won't be looking to spend it any time soon. Reduced income due to COVID means I won't be spending much at Christmas this year.

I have a stocks and shares isa which is longer term savings so perhaps just more it into there?

So your question is realy "should I move more of my wealth out of cash and into shares?"

Investments are not the same as savings.

£5,000 in cash is a reasonable cushion. It would probably be enough for unexpected expenses (a new roof, for example, or an unexpected wedding) so I wouldn't reduce that.

Without wishing to be impertinent, what proportion do you have in shares, and are you a higher-rate taxpayer?

Are you in regular employment and have you lived through crashes such as unemployment or severe illness?

I think everyone should aim to have 5k in an easy access ISA for emergencies, so don’t worry about the rate, just have it somewhere safe and accessible for if the shit hits the fan. Then, open up another account for every day savings like Christmas etc. If you have a mortgage, try to overpay a bit, even £50 a month can make all the difference and help clear it quicker.

Not sure how a wedding can be unexpected, however I am already married so don't need to worry about that.

I don't have a mortgage. Perhaps I should just leave it.

We’ve got to £10k of savings and a year until our eldest goes to uni. We’re thinking of bunging it into premium bonds as interest rates are so low.

Go onto the MoneySavingExpert website and check out Martin Lewis’s recommendations.

Why don't you put it in premium bonds? You can get your money out in a few days whenever you need it, and you might just win a million quid!

Premium bonds! I put £8000 in them end of May and already won £25

What is the interest rate on the savings account? As you describe it as a basic savings account, I wonder if the interest rate is actually 0?

If so, you could find an instant access account that will pay interest - have a look at money saving expert for advice.

It sounds as if the 5K is (or should be) an emergency fund and thus needs to be in savings and not in stocks and shares, which will give a higher return over the long term but may be worth far less at the point where you need it for an emergency.

You could then look for a longer term savings vehicle for any spare cash over and above the 5K.

The interest rate is 0.01%

Will look at premium bonds.

premium bonds prize fund is currently 1.4% p.a. tax free, but as it is raffled you might get less or more. The great majority of prizes are £25 so on average luck you might get almost three a year.

It is considered a very safe place to save.

You can have any winnings reinvested in additional bonds.

usually the banks protest if National Savings pay over the odds, as they don't like the competition, but currently they can borrow at next to nothing so they don't care.

6 months of expenses in cash savings, held somewhere safe... that is a great thing to have. £5k might be 6 months of expenses, or it might be too little, or too much.

0.01% - you can do better than that but if you get 1% then it's still a tiny amount.

I would not invest the money. You need a safety cushion - nice fat emergency fund. We are in the early phase of a worldwide pandemic, so anything could happen over the next few weeks, months or even longer time period.

NS&I is a safe place... no interest when in premium bonds but might get winnings. They also have a Direct Saver product which is currently paying 1%. The only downside of NS&I is that it takes a few days to access the money in my experience. So I keep a few thousand in a bank account where I can draw from it using a debit card.

If you look at Money Saving Expert , there is a section that lists decent savings accounts. I think National Savings are paying 1% at the moment. A few other building Societies are paying a bit more that you are getting. Itsworth moving to another account, butI amnot sure that I would be outting too much into stocks and shares at the moment, if I didn't have a decent cash backup.

look at it this way - a bit of effort and you can get 100 times that interest rate, maybe even 140 times it.

obviously still bugger all but the 0.01% rate is plain insulting.

no more in stocks and shares than you can afford to lose.

We've just put £10k in premium bonds and this is our first month and we won £25 😁 luck of the draw but good start and we've reinvested in.

I have some and, in the long run, the return averages out at about the same as the prize fund percentage.

If you only have a few, you're unlikely to reach that average. might be less; if you're lucky it might be more, if you're unlucky it might be nil.

Prizes are free of income tax.

The way the government seems hell bent on causing inflation 1 or 2% isnt going to make much difference.