Where to invest £500 a month and retain emergency access
Discussion
Hi all,
I stumbled across the Finance section of PH a few weeks ago and it has made me think that I’m not currently making the most of my savings.
I put £200 a month away for my kids in and e-savings account which is linked to my current account and pays hee haw interest (current balance circa £13k).
I also save circa £300 a month in an isa.
I like having access incase of an emergency/ redundancy. My Mrs is super cautious and doesn’t like the idea of investing the kids money incase we never see it again.
I had thought of over paying the mortgage with the £300 a month but given the sub 2.00% rate I think I might be best opening S&S isa’s?
Any other ideas?
Also, is there any reason to put the full £500 a month in a single S&S isa or is there a benefit to opening several?
Thanks
Stuart
I stumbled across the Finance section of PH a few weeks ago and it has made me think that I’m not currently making the most of my savings.
I put £200 a month away for my kids in and e-savings account which is linked to my current account and pays hee haw interest (current balance circa £13k).
I also save circa £300 a month in an isa.
I like having access incase of an emergency/ redundancy. My Mrs is super cautious and doesn’t like the idea of investing the kids money incase we never see it again.
I had thought of over paying the mortgage with the £300 a month but given the sub 2.00% rate I think I might be best opening S&S isa’s?
Any other ideas?
Also, is there any reason to put the full £500 a month in a single S&S isa or is there a benefit to opening several?
Thanks
Stuart
So far as I know if you put money in a proper child ISA it's locked away and it's theirs and you can't touch it.
If you put money in a normal ISA you can get at whatever the investments are worth pretty much instantly (couple of days perhaps) but of course it may not be worth what you put in because investments aren't the same as savings.
It's the risk/reward thing basically.
If you put money in a normal ISA you can get at whatever the investments are worth pretty much instantly (couple of days perhaps) but of course it may not be worth what you put in because investments aren't the same as savings.
It's the risk/reward thing basically.
I suggest you need to think about layering your savings rather than treating them as one pot.
Emergency fund: very wise to have one, but think carefully about how much you need to hold in it. Six months living expenses would be a good start, 12 months would very comfortable. Maybe you start out at 3 months & then add to it every month until you are happy. Hold these funds in some sort of instant access acount, but be aware that they are going to fall in value by about 2% every year due to inflation.
ISAs: given you're not saving anywhere near the allowable £20k a year it's a bit questionable if it's worth opening Junior ISAs as this would lock the money away. Any funds in your ISA are always accessible so it's not as if you can't get to them but you do have to decide how much risk you are prepared to take with them. If you want no risk then you have to accept that you'l lose about 2% compounded of the years, & that's a big loss. You need to make about 3-4% just to stand still allowing for inflation & charges - & 1% charges is a pretty low level. There are a number of institutions you could look at; Vanguard is a commonly suggested one. The charges are reasonable & they have a number of funds you can choose from. You don't have to have it all in the same fund & can spread it between a safe one & a more risky one if that's what you decide you want.
Pensions: these are usually very tax efficient so consider carefully how much you contribute. The downside is that the funds are locked awy for a long time of course.
Holding lots of cash is only going to lead to an erosion in value of your savings & these days you need to put them to work, even if it's only getting you a bit of return. Current times are tricky of course & no-one can predict the future.
You might also want to read through the IM sticky at the top of the Finance forum.
Emergency fund: very wise to have one, but think carefully about how much you need to hold in it. Six months living expenses would be a good start, 12 months would very comfortable. Maybe you start out at 3 months & then add to it every month until you are happy. Hold these funds in some sort of instant access acount, but be aware that they are going to fall in value by about 2% every year due to inflation.
ISAs: given you're not saving anywhere near the allowable £20k a year it's a bit questionable if it's worth opening Junior ISAs as this would lock the money away. Any funds in your ISA are always accessible so it's not as if you can't get to them but you do have to decide how much risk you are prepared to take with them. If you want no risk then you have to accept that you'l lose about 2% compounded of the years, & that's a big loss. You need to make about 3-4% just to stand still allowing for inflation & charges - & 1% charges is a pretty low level. There are a number of institutions you could look at; Vanguard is a commonly suggested one. The charges are reasonable & they have a number of funds you can choose from. You don't have to have it all in the same fund & can spread it between a safe one & a more risky one if that's what you decide you want.
Pensions: these are usually very tax efficient so consider carefully how much you contribute. The downside is that the funds are locked awy for a long time of course.
Holding lots of cash is only going to lead to an erosion in value of your savings & these days you need to put them to work, even if it's only getting you a bit of return. Current times are tricky of course & no-one can predict the future.
You might also want to read through the IM sticky at the top of the Finance forum.
Thanks for the replies.
I’m not looking to open child isa’s as I don’t want to lock the money away and I want to retain control of it.
I am looking to save/invest the kids £13,000 and £200 a month for the next 10 years and I’m conscious that inflation is currently eating away at it.
I’ve previously had premium bonds and cashed them in for a house deposit. Wouldn’t be against buying more but when I read some of returns that people are getting in S&S isa’s it made me wonder if I’m missing out.
I think the suggestion of splitting the pot up is a good one and I will have a look at the sticky thread suggested.
I have given some thought to increasing my pension contributions but I’m not keen on locking the money away.
Sounds like a mix of premium bonds and a couple of isa’s might be best.
Cheers
I’m not looking to open child isa’s as I don’t want to lock the money away and I want to retain control of it.
I am looking to save/invest the kids £13,000 and £200 a month for the next 10 years and I’m conscious that inflation is currently eating away at it.
I’ve previously had premium bonds and cashed them in for a house deposit. Wouldn’t be against buying more but when I read some of returns that people are getting in S&S isa’s it made me wonder if I’m missing out.
I think the suggestion of splitting the pot up is a good one and I will have a look at the sticky thread suggested.
I have given some thought to increasing my pension contributions but I’m not keen on locking the money away.
Sounds like a mix of premium bonds and a couple of isa’s might be best.
Cheers
zj2016 said:
Thanks, I wasn’t aware of that. Will do a bit of research into some potential providers.
Cheers
Some research on platform providers already done for you here:Cheers
https://moneytothemasses.com/saving-for-your-futur...
Scroll down the page and there's a table listing the S&S ISA providers with the estimated cost (assumes 10 fund switch) based on your investment pot size. Also similar table below for shares or investment trust too.
According to this article, AJ Bell appears to suit monthly savers like yourself (you should perform your own checks if this meets your personal situation), plus I believe this platform has access to the markets major investment houses meeting any diversification requirement.
Apart from cost angle as covered in this article, you should consider other factors which maybe important to you too e.g. choice of fund/diversification, phone app/website, quality of customer services, etc...
Edited by chip* on Saturday 24th October 16:05
Depends on your risk profile...
If cautious, get an offsite mortgage, guaranteed the rate of return on the mortgage, albeit only 2% in your case, but instantly accessible and better than cash rates.
If more medium upwards in risk profile, then S&S ISA, but you may be in an area that requires you to make fund decisions you are not used to, and accepting fluctuating values also.
How about keeping the lump sun as the emergency fund ( depending on your income levels ) and then regularly invest for 10 years, which actually reduces your investment risk over dropping in a lump sum.
If cautious, get an offsite mortgage, guaranteed the rate of return on the mortgage, albeit only 2% in your case, but instantly accessible and better than cash rates.
If more medium upwards in risk profile, then S&S ISA, but you may be in an area that requires you to make fund decisions you are not used to, and accepting fluctuating values also.
How about keeping the lump sun as the emergency fund ( depending on your income levels ) and then regularly invest for 10 years, which actually reduces your investment risk over dropping in a lump sum.
If you can afford to put money away for kids, children’s ISA 100% at the moment. £9k a year and it’s completely tax free. I got my son a S&S ISA with Hargreaves this year. Stuck £6k in it. £3k in Barclays and £3k in RDSB. Going to keep topping up until his 18. Should be worth a tidy sum for him providing government don’t change the rules.
zj2016 said:
I’m not looking to open child isa’s as I don’t want to lock the money away and I want to retain control of it.
I am looking to save/invest the kids £13,000 and £200 a month for the next 10 years and I’m conscious that inflation is currently eating away at it.
I’ve previously had premium bonds and cashed them in for a house deposit. Wouldn’t be against buying more but when I read some of returns that people are getting in S&S isa’s it made me wonder if I’m missing out.
I think the suggestion of splitting the pot up is a good one and I will have a look at the sticky thread suggested.
I have given some thought to increasing my pension contributions but I’m not keen on locking the money away.
Sounds like a mix of premium bonds and a couple of isa’s might be best.
You keep saying you don't want to lock money away but what is the reason for this? Do you have a particular plan for it, such as a deposit on a house, or are you just fixated on having it available for some unspecified & unknown purpose? I can understand the comforting feeling of a big number in your bank account but it's a depreciating asset & you will lose out significantly over the next ten years.I am looking to save/invest the kids £13,000 and £200 a month for the next 10 years and I’m conscious that inflation is currently eating away at it.
I’ve previously had premium bonds and cashed them in for a house deposit. Wouldn’t be against buying more but when I read some of returns that people are getting in S&S isa’s it made me wonder if I’m missing out.
I think the suggestion of splitting the pot up is a good one and I will have a look at the sticky thread suggested.
I have given some thought to increasing my pension contributions but I’m not keen on locking the money away.
Sounds like a mix of premium bonds and a couple of isa’s might be best.
The return on Premium Bonds has just been cut & now averages 1%, only half of the rate of inflation. It's the sort of place for your emergency fund but it's not a sensible investment. Yes you might win £1m but your average return on £13,000 is £130 a year.
I'd caution against writing off making further pension contributions as they can be one of the most efficient ways of saving. No-one else is going to give you an instant 20% uplift or if you get employers contributions or contribute via salary sacrifice it's very advantageous. Yes the money is locked away but you don't have to put everything into your pension. One of the main concerns is that the majority of people aren't saving anything like enough for their retirement & one of the most advantageous things you can do it start making contributions as early as possible to give compounding time to work.
The key is balance - spread it around between different saving mechanisms for different purposes.
No particular plan for the money, having access is purely for peace of mind incase of redundancy.
From all of the advice so far, I’m thinking of S&S isa for the £200 a month. And I’m undecided about the £13,000. I have other accounts as a rainy day fund so probably don’t need access to the kids money.
I’m not that clued up on pensions. I currently pay 5% to my pension via salary sacrifice and my employer pays an additional 7.5%. As a higher rate tax payer I’ve seen some chat about missing out by not paying in more? However I also have a small equity stake in my company so I treat that as a pension as well.
A colleague recently retired and it has made me think more about my longer term financial planning and I might speak to an IFA, this is what led me to have a nosey through the finance section.
From all of the advice so far, I’m thinking of S&S isa for the £200 a month. And I’m undecided about the £13,000. I have other accounts as a rainy day fund so probably don’t need access to the kids money.
I’m not that clued up on pensions. I currently pay 5% to my pension via salary sacrifice and my employer pays an additional 7.5%. As a higher rate tax payer I’ve seen some chat about missing out by not paying in more? However I also have a small equity stake in my company so I treat that as a pension as well.
A colleague recently retired and it has made me think more about my longer term financial planning and I might speak to an IFA, this is what led me to have a nosey through the finance section.
zj2016 said:
I’m not that clued up on pensions. I currently pay 5% to my pension via salary sacrifice and my employer pays an additional 7.5%. As a higher rate tax payer I’ve seen some chat about missing out by not paying in more? However I also have a small equity stake in my company so I treat that as a pension as well.
People mention pensions because the tax rules are really favourable, especially if you're a higher rate tax payer now, but likely not to be in retirement.https://www.which.co.uk/money/pensions-and-retirem...
is a decent explanation. I suspect the tax treatment of the stake in the company isn't as good.
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