what to do with savings? (apologies to those who don't have any...)

[elliott]

Just wondering, for those of us fortunate to be able to put money aside into savings, what on earth we should do with it in the current climate?
At the moment I have not done anything. I have a bit of money in equity ISAs, which has presumably plummeted in value, but I am still making monthly contributions on the basis that it is probably a good idea to keep buying during the trough.
Otherwise, I have a few years worth of cash ISAs that are probably earning lousy interest rates now. I have wondered about plundering these to pay off part of the mortgage (which is currently on a crap 5.9% fixed deal) but not sure if this is wise.

What to do? Cash or equities? Pay off mortgage? Or just inertia?

But what are you doing with your rainy day money? I keep thinking we should be saving like mad, but then I think where? and what for? is it better to just spend it at the moment?

I have completely mistimed all my equity investments - most of it went in just before the 2001 crash so will probably never even get back to what it was. Its kind of put me off equities tbh but then I just don't know what else to do with savings. We should try to build up some, especially since dh has crap pension atm.

Are there no more fixed interest cash ISA deals out there?

Get an offset mortgage. Don't pay any tax on interest, have ready access to cash if you need it and it reduces interest on the mortgage.

We have had a flexible mortgage for donkeys, so put all of what would otherwise be savings into that, and pull it back out when we want/need it.

that's a good thought. I've already used this year's cash ISA allowance but will look for a fixed rate one for next year.

Yes, we already have an offset mortgage. I don't really class my offset money as 'savings' though as its mostly money waiting to be spent! And its not actually growing at all.

Working Lunch (on BBC2) are just about to do a feature about what to do with your savings....

Too bad I'm at work! Let me know what they say if you watch it!

Equities. Definitely. They are normally the first thing to emerge from the gloom.

But I would probably stay away from retailers, petrochemicals and oils. i think banks are now vastly undervalued but I would steer clear of the partially nationalised ones.

Elliot - You are right - offset monies are not savings in the strict sense. Offset mortgages cease to become such a brilliant idea when mortgage rates are so low in any case. Hargreaves Lansdown www.h-l.co.uk were offering 6% per annum for savings locked up for 12 months.

And if you are really gloomy
you can have a look at PMs.

Brace yourself for a sickening rollercoaster ride, though!

PMs?

Are you a higher rate tax payer? can you tie up the money? if so then national savings are by far the best place at the moment. Interest is tax free and they do an inflation tracker which pays a set amount above inflation. At the moment its the biggest return on your money savings wise.

We are having a similar nightmare. sold our house last year and in rented and we were using the intereest from our equity to pey the rent. Now it doesn't covere half of it. WSe can't tie up the money because we might buy a house and so its stuck in Northern Rock wich I hear today the government is reconsidering its options on.

Not good

I disagree about the offset though. Given your interest rate on your mortgage it is by far the best option for your money since again you don't pay any tax so you're saving more than you think.

Yes and yes fishnet (though dh is standard rate tax). Though funnily enough National Savings were my big idea for last year's savings and then the direct ISA interest rate plummeted.... AND I put a load into index linked savings just as inflation went down again
I guess timing's not my thing. Which is why I'm kind of reluctant to change anything at the moment.

I just looked at my offset account details and have been cheered by the amount I've saved by offsetting. But then again, why don't I just cash in my isas and pay off the mortgage? (It's not very big).

your offset is definitely your best bet. If you can reduce your mortgage payment by £100 per month by ofsetting, thats £40 saved (since you would have paid that £100 out of net income).

Stick it in your offset account. Keep out a small amount in case the worst came to the worst and your bank crashed (not as likely now) since you would not get it back, you'd just end up with a smaller mortgage debt. You therefore need to keep a little rainy day money out.

Having savings is causing me endless stress at the moment!

Not much point paying off the mortgage. By offsetting you keep the flexibility to access the money if you needed it in a crisis.

Depending on the amount you get on your isas it might be better to put it in the offset but you'd have to do some number crunching

YEs fishnet I forgot the index-linked nat savings thing!

elliot, if your savings are enough to wipe the mortgage
I personally would do that but that's because I hate debt.

PMs = precious metals

ignore my £100 £40 thing. That was wrong

If you pay off your offset mortgage, some schemes let you retain the facility without any further arrangement fee. We've paid off our mortgage but have retained the facility to draw down funds whenever we want to. Perhaps you should check?

Glad this thread reminded me to put away excess cash
earning a pittance in my ING account.

I am going for the National Savings Index-linked Savings Certificates
as my greatest concern is inflation.
(I am aware that deflation is the Bogeyman of the Moment.)

The interest they pay is RPI Index + 1.00% AER, tax-free, guaranteed compound rate after 3/5 years.
Beware, no interest if you take out your money within 12 months.

DaddyJ that's where most of my savings are at the moment and I was kicking myself because of the deflation doom and gloom - why are you most worried about inflation?

Gut feel.
I think governments will do anything to avoid deflation
but will accept inflation as a necessary evil.

My best guess, nothing more!

I bought into index-linked certificates 2 years ago
and if I understand them and this table correctly
I have earned an average of 5.5% per annum tax-free so far.
Seems like an alright return.