Good place to put £5K?
Discussion
I need a good home to put an unexpected inheritance of £5K. I want a good return but might need it back next year to help pay for a new kitchen.
HSBC e-saver is 5.75% AER but you lose a month's interest on withdrawal, so the more you put in, the more you lose eventually.
All (sensible!) suggestions welcomed please
HSBC e-saver is 5.75% AER but you lose a month's interest on withdrawal, so the more you put in, the more you lose eventually.
All (sensible!) suggestions welcomed please
Dull answer -
Less than a year - put it in the Bank with the highest interest rate you can get.
One year - put into a bond, either high street or corp.
Your could buy shares but not unless you can afford to lose atleast some of your kitchen money.
Moneysupermarket have a good rates table.
Less than a year - put it in the Bank with the highest interest rate you can get.
One year - put into a bond, either high street or corp.
Your could buy shares but not unless you can afford to lose atleast some of your kitchen money.
Moneysupermarket have a good rates table.
Is it worth putting it in an ISA, paying for the kitchen on a cashback credit card and transferring the balance to a zero percent card to take it over the tax year to retain the tax benefit? Or just hold off on the kitchen for a short while?
Or even, does your mortgage have a borrowing facility if you overpay? May be worth paying off 5K of mortgage for a year.
Or even, does your mortgage have a borrowing facility if you overpay? May be worth paying off 5K of mortgage for a year.
mr_spock said:
Is it worth putting it in an ISA, paying for the kitchen on a cashback credit card and transferring the balance to a zero percent card to take it over the tax year to retain the tax benefit?
Blimey, creative but sounds like too much brainwork!mr_spock said:
Or even, does your mortgage have a borrowing facility if you overpay? May be worth paying off 5K of mortgage for a year.
I wish I'd paid a lump off ages ago but IFA advised otherwise and I believed him :sigh: There's now have only 5 years to run so I'm not sure there'd be much saving - would there? Edited by Simpo Two on Saturday 20th October 22:11
A lot depends on your personal tax position. Let's assume you're a higher rate (40%) taxpayer.
Option 1: savings account
You take your 5K, put it it a 6% per annum interest earning account, assume you leave it a year. You make £300, but pay 40% tax on it so you net £180.
Option 2: pay off mortgage a bit
Your 5K goes into your mortgage. Let's say you're paying 6% also, and for the save of convenience let's assume the 5K pays off capital only. Your interest is reduced by £300 in a year - but as you're reducing outgoings, not earning interest, you pay no tax on this saving. So your net is £300.
Which is (partly) why I have an offset mortgage.
The ISA idea probably isn't so clever if you're not sure how long you can leave the money in it.
ETA: I am not a financial adviser, just an ordinary chap who's had to think about this stuff. Please check with your financial adviser and don't take anything on the Internet as reliable.
Option 1: savings account
You take your 5K, put it it a 6% per annum interest earning account, assume you leave it a year. You make £300, but pay 40% tax on it so you net £180.
Option 2: pay off mortgage a bit
Your 5K goes into your mortgage. Let's say you're paying 6% also, and for the save of convenience let's assume the 5K pays off capital only. Your interest is reduced by £300 in a year - but as you're reducing outgoings, not earning interest, you pay no tax on this saving. So your net is £300.
Which is (partly) why I have an offset mortgage.
The ISA idea probably isn't so clever if you're not sure how long you can leave the money in it.
ETA: I am not a financial adviser, just an ordinary chap who's had to think about this stuff. Please check with your financial adviser and don't take anything on the Internet as reliable.
Edited by mr_spock on Saturday 20th October 22:35
such as?
shadowninja said:
I already have one!
Ah but could you sell it on gov and make a small profit? There must be ways to make money with a £5k starting point, better then investing it. Small businesses make money like this all the time.
Me, I'd buy some ls7 crankshafts and other parts that are on offer.
Edited by Boosted LS1 on Sunday 21st October 10:16
Boosted LS1 said:
There must be ways to make money with a £5k starting point, better then investing it. Small businesses make money like this all the time.
Problem is most such small businesses take 3 years and much financial hardship before they breakeven. I often wonder how the hell those shops selling cheap jewellery and pewter dragons manage to make enough to pay their rent and rates let alone make money to feed the owner. Must be a front for the owner's narcotics empire!If you plan to use your £5k to make money with, think very carefully about how much time it will take.
If your business takes ten hours a week to look after, and doubles your money in a year, then you have just earned about a pound an hour. better to have stuck the money in the bank and done some overtme instead.
Percentage returns do matter, but so does efficient use of your time.
If you have a business plan that makes sense, then it is worth thinking about leveraging up a bit, if you can, so you are starting witha bit of a bigger pot.
If your business takes ten hours a week to look after, and doubles your money in a year, then you have just earned about a pound an hour. better to have stuck the money in the bank and done some overtme instead.
Percentage returns do matter, but so does efficient use of your time.
If you have a business plan that makes sense, then it is worth thinking about leveraging up a bit, if you can, so you are starting witha bit of a bigger pot.
From your 'fleet' I'm guessing you are a '40%' tax-payer. So tax is likely to be your biggest single enemy in terms of your return on this - far more difference than a .25% difference in interest rates between banks or a 1 month penalty on withdrawal.
I'd ISA 3k cash, best terms you can find.
And use the rest to offset the mortgage, assuming you can.
Both should be relatively easy to unwind when you want the money back...
I'd ISA 3k cash, best terms you can find.
And use the rest to offset the mortgage, assuming you can.
Both should be relatively easy to unwind when you want the money back...
Id have to agree with the pay it off the mortgage (given you can make overpayments) its the most tax efficient thing to do.
Also remember if your paying 6% on your mortgage then (if a 40% tax payer) thats a gross of 10% risk free.
Im switching to an Offset Mortgage next year and have discovered that IF (Inteligent Finance) allow you to put in your cash ISA's against the Mortgage without you losing those years Tax allowences.
Ive also had a play on the Virgin on account and the Actaul APR is 7.3% however it estimates the actual APR as 1.4% this is due to all the tax savings you will be making. Best bit of all is that given I do this it will reduce my term from 20 years to under 5 years... thats a lot of interest saving.
Also remember if your paying 6% on your mortgage then (if a 40% tax payer) thats a gross of 10% risk free.
Im switching to an Offset Mortgage next year and have discovered that IF (Inteligent Finance) allow you to put in your cash ISA's against the Mortgage without you losing those years Tax allowences.
Ive also had a play on the Virgin on account and the Actaul APR is 7.3% however it estimates the actual APR as 1.4% this is due to all the tax savings you will be making. Best bit of all is that given I do this it will reduce my term from 20 years to under 5 years... thats a lot of interest saving.
Thanks for the suggestions everyone - some very creative!
The 'fleet' is all paid for; it's no indication of current income and I only hit 40% once, in about 1997.
I'm tired of investing in the stock market and watching things go down, so this one's going in the Building Society I'm afraid. When invested in a kitchen it will add more than that to the value of the house, but I have no plans to move, and I'd need another £50K to get an extra bedroom/double garage!
The 'fleet' is all paid for; it's no indication of current income and I only hit 40% once, in about 1997.
I'm tired of investing in the stock market and watching things go down, so this one's going in the Building Society I'm afraid. When invested in a kitchen it will add more than that to the value of the house, but I have no plans to move, and I'd need another £50K to get an extra bedroom/double garage!
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