What to do with this money

[Sorrynotsorry2]

Hi . I will be talking to a financial advisor. But wanted to see if anyone else could help. I have a sum of £5000 that I would like to put into savings or an isa , or maybe bonds. Does anyone know what the best way forward is. I want something to lock into but also not to be penalised if I need to take the money out , if I desperately needed it.

Thank you

I don't think you need to talk to a financial advisor at all - they're very expensive, and will take a relatively large proportion of your money.

I'd probably go for premium bonds - you'd have a reasonable chance of winning a prize, and the money would be accessible (it only takes a few days to request the funds back in your bank account).

You don’t need an adviser. Just put into a high interest bank account, your bank probably has a decent saving account rate with no penalty. Or premium bonds?

You might be right. Maybe premium bonds are the way forward.

I also don’t think you need a financial advisor. I recently sold my home and had £55k which I wasn’t sure what to do with. I got free advice from a financial advisor and their recommendation was maxing out my ISA allowance, putting some in premium bonds and putting some in a fixed rate fixed term savings account. They said it wouldn’t be worth my while investing as I’d likely need access to the money in 2-3 years.

Stick it in premium bonds, you’ll have a chance of winning every month. You can withdraw money and have it in your account in around 3 days if you need it

Have a look at moneysavingexpert.com.

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#types

If this money is your only savings you just want an instant access account. Or if you fancy gambling the interest without risking the capital, Premium Bonds.

If you need the money in less than 5 years, then I would not be investing it. If you expect to leave it 5 years and ideally longer, but might need access to it, then a Stocks & Shares ISA could be used, inside which you have a global fund so that the money is invested around the world, across thousands of companies.

There are many books, podcasts, YouTube videos about investing, some which are made by UK financial advisers/planners to help you get started with investing.

Here is a podcast to get you started: meaningfulmoney.tv/UG4

I would just go for a fixed rate ISA, there are some good rates around at the mo.
Choose the number of years you want to lock it away for with care, you won't have to pay a fee if you withdraw it early but you will loose your interest.

We are great fans of PB's but in all honesty, with only £5k I doubt you will see much (any?) return.
We both have FH and enjoy both the return AND the fun, when we only had smaller amounts we got next to nothing.

We spoke to an IFA earlier this week. His advise was to max out your ISA allowance. Then pension and premium bonds - all tax free.

You don't need a financial advisor. You should put the money into an ISA. Just shop around for the best rate. The rates are good at the moment.

If £5,000 is all your savings (or the majority), you shouldn’t be investing in stocks and shares.

An ISA is only of benefit to most people if they have already used up their tax free savings allowance (more on this below) as other non ISA savings accounts usually pay more interest than an ISA.

Things to consider before choosing which account to use:

1. Access to the money. How long are you prepared to wait if you need access to the money? E.g. not at all, 30 days, 3 months, 6 months a year, five years etc. Some accounts allow you to lock the money away but access it with notice, some let you have one or two withdrawals a year, others let you withdraw money early if you sacrifice some of the interest (often 6 months’ worth) on the whole account and some won’t let you access it at all until the time is up.
2. Are you aware of what your savings allowance is and how much of it you already use up on existing savings? E.g. if you work and pay tax at 20%, you can earn an extra £1,000 a year in interest on your savings tax free. £5,000 at 5% interest is £250 so would be tax free. If your income is low then you get a higher savings allowance. https://www.gov.uk/apply-tax-free-interest-on-savings
3. Do you foresee a time in the future when your income and/or savings are likely to significantly increase so that you are at risk of paying tax on your savings as you have used up your allowance or been moved onto the lower allowance? Using your ISA allowance now will protect the savings interest from tax permanently.

Once you have answered the questions above you can use somewhere like moneysavingexpert to find an account that meets your needs.

I'm assuming you don't have substantial savings elsewhere, so unlikely to pay tax on savings interest?

Look at the savings rates offered by your bank or building society where you hold your main current account, or where you already hold any other savings accounts. Quite a few are offering loyalty savings products where rates are higher for existing customers.

Most lock-in savings do not allow access until the term is up.
Cash ISAs must allow access, even fixed rate ones - although they might offer a slightly lower interest rate or a loss of some interest for early withdrawal, you always have the option to access your capital - the amount you put in- if you need to.

Unless you have substantial savings you are very unlikely to benefit from Premium Bonds (which are essentially are a marketing ploy) as they earn no interest.
So as an example - £5,000 in a Fixed interest 3-year Cash ISA with Virgin Money, currently paying 4.55%, would earn around £714 if left in for 3 years.
That's quite a lot of interest to relinquish on the tiny odds you might win a prize on Premium Bonds.

I find Savings Champion website a good source of information for the best rates and savings products. You can just access their comparison tables for the info you need, or sign up and they will alert you by email if a better rate comes along.

https://savingschampion.co.uk/

Thank you

Thank you for this .

You really don't need an ISA if that's your only savings.
ISAs generally offer less interest than many other easy access savings accounts and unless you are a high rate tax payer or have more than £1000 a year of interest on other savings an ISA isn't the best bet.
Premium Bonds not worthwhile unless you have the maximum holding.
Look at an easy access account like Marcus or Chase.

Do you have any debts?

You can put up to 50k per person into NS&I Premium Bonds
The prizes are tax free
You can access the money within a week

Secondly, do you have a private pension ?

Thirdly pay off any debts

Keep some money available for emergencies

Look on Money Saving Expert website
Lots of info on there

Apart from my mortgage, no .

Thank you.

Don't get an ISA unless you'll pay tax on your savings

But an ISA also has other advantages not just tax efficiencies.

Government regulations mean ISAs must have easy access for the capital invested - even fixed rate, fixed term ISAs must allow access to the money. This rarely applies to other fixed rate savings products, which can be locked away until the fixed term is finished. So if the OP wants to lock away her money in a fixed rate product but have access to it in an emergency, a cash ISA might fit the bill.

I’m a fan of premium bonds for larger sums of money, but I don’t think £5000 will give you the return you want. The chances of winning anything, even £25 are currently 1 in 24,000. Maybe a high interest account is better for you. I’d also suggest having a look what MoneySaving Expert advises.