£6000 to put in ISA - any advice

[GoldDustWomanSteph]

I've never had much in the way of savings (minimum wage jobs) but I've had a small inheritance of £6000 which I don't want to touch. Would it be a good idea to put it in ISAs and if so, how do I find the best one?

TIA

Can I point you towards a book... as I feel you probably need to learn about investing before dipping your toe in.

Meaningful Money Handbook by Pete Matthews. It is a UK personal finance book and will take you through three key phases: Managing your money - Protecting your things - Investing wisely.

You say you have never had much in the way of savings, so putting all of the £6k in to an investment is probably not what you want to do, even though inflation will erode it. You need to establish how much risk you are prepared to take... investing in the stock market is risky, at the moment you are likely to see a loss initially... how would you feel about your £6k being worth £5k in six months time? Investments are for the long term, at least 5 years ideally much longer.

For now I would park the money somewhere that you get a guaranteed interest rate (such as an interest paying current account or online savings account) and learn as much as you can about managing money and investments.

If you don't have any savings currently, you want to keep the money in cash, not in stocks and shares, so it can be used as an emergency fund, or to fund a large purchase and you don't put your money at risk.

Due to the tax free savings allowances, ISAs are a bit redundant for most people, so you just need to find the best interest rate, which is likely to be from a fixed term savings account, where you lock your money away for a defined period. I would go for 1-3 years right now and then you can decide then what to do with your money.

Have a look here to find an account that suits your needs and maybe as well as the book suggested above, have a look at the moneysavingexpert website, and sign up to their weekly newsletter to learn lots about all aspects of making your money go further.

Thanks very much, nick and Barbara.

I'm going to order the book and will have a look at the websites tonight. I take your point about ISAs not being as attractive anymore. I am completely risk averse as I can't afford to lose anything - even in the short term.

I'm considering putting the money towards paying off my mortgage. In addition to the £6000, I've got about £2000 as a rainy day fund.

If you are debt free other than the mortgage then increasing your rainy day fund to somewhere between 3 to 6 months of expenses and then paying some off your mortgage would be fine in my view. Personally I paid off my mortgage as quickly as I could.

Depending on what interest rate you are paying, it could be a very good idea to pay money off your mortgage rather than putting it into a savings account, you may be paying more in interest than you could earn from a savings account - this page (and MoneySavingExpert in general) is excellent at explaining this.

www.moneysavingexpert.com/mortgages/mortgages-vs-savings/

If I were you wouldn't worry too much about reading up on investments, stocks and shares etc if you have a very low risk appetite and only a relatively small amount of capital to invest. I would simply change my current account to one that pays a good level of interest on capital up to say £5k, and/or which has a good linked regular saver as your 'emergency fund' (again money saving expert is your friend here, has a list of all the best ones), max this out then pay the rest off my mortgage. That way your money is as safe as it possibly can be whilst earning a small amount of interest.