Mark:

Just as an afterthought, the greatest risk with online banking comes from not having a secure computer setup. Make sure you have good anti-virus and anti-spyware software and keep it updated all the time; make sure you have the latest security updates/patches installed as soon as they come out (Windows Update is normally the second Tuesday of the month, so that's tomorrow). Never save your login details on the computer (even if it is never used by anyone else - just in case the computer is stolen).

But of course that is not a fault in the savings product. You do not need to worry unduly about security so long as you do I suggest above.

Colin.

Mark:

In theory, no risk; unlike stocks and shares where the value can go down as well as up! The very worst that can happen is if the institution you are saving with goes bankrupt, but if you are saving with a reputable company it is covered by a guarantee of 100% of the first £2000, and 90% of the rest. But what are the chances of that? There is far more risk every time you get out of bed!

Colin

Just another quick question. I would assume there is no risk with investing in a mini cash ISA is there?

Cheers.

Colin,

Thats very helpful advice, thanks very much.

I think to save confusion I will set up just an ISA and an instant access savings account. Then move more over in the new tax year as you suggest.

Thanks again.

Mark:

As you have £6000 to invest initially, I would put £3000 in the ISA of your choice now, and £3000 into a high-interest instant access account with monthly interest such as Icesave with 5.45% gross and fantastic rate guarantees longer than all the competition (and no introductory bonus which you lose after 6 months!). Then add £250 a month to that, and put £250 a month into a regular saver that pays even more. Then on 6th April, move £3000 into the ISA. It can all be set up online very easily. And if you haven't already done so,you may wish to consider switching your current account to Alliance & Leicester. There is a choice of 2 accounts: the Premier Direct pays 6.1% gross on balances between £1 and £2500, or the Premier pays just 1.5% but is linked to a regular saver that pays 12% for a year and gives free annual travel insurance. Oh, and if you do that, contact me so we can both fill in the voucher and each get £25 for nothing! It was £50 each until last week but it has just gone down :-(

Colin

That's basically right, Mark. I prefer to have my interest paid monthly so that way I can see it going it every month (and it is there if I ever should need the money quickly), but it is a matter of personal preference. At the moment the best rate for annual interest instant access cash ISA seems to be National Savings and Investment at 5.55%, but there is a minimum deposit of £1000, minimum extra deposit and minimum withdrawal is £250, and interest is annual. Bradford & Bingley offer 5.3% again with a minimum deposit of £1000 ( and subject to the balance not falling below the £1000), but subject to that one proviso you can add any extra extra amounts or withdraw any amount at any time without penalty by direct debit to-from a nominated bank current account; they also pay a monthly interest. If you have less than £250 to invest initially, Kent Reliance Building Society are paying 5.46% with a minimum balance of just £1, but only annual interest, and this account cannot be operated by internet so is far less flexible unless you happen to live round the corner from a branch! Also bear in mind that you will not pay tax on an ISA; you can pay in a maximum of £3000 in any tax year (6 April-5April) and once you have credited £3000 in any one tax year, you cannot put back in anything you take out until the next tax year.

On other savings accounts, assuming you pay tax at standard rate, you will lose 20% of the gross interest to the tax man; so for example an account paying 5.45% gross like Icesave, which I recommend, will pay 4.36% net.

Hope this helps.

Colin

anyone?

Thanks alot for your responses, it's already been a big help.

I hope you don't mind me asking another question!

Basically I don't really understand how much interest I would get.
With the mini cash ISA (or any other account), say the interest AER is 5.50% and its paid annually, does that mean at the end of the year I'll have £3,165. i.e. 5.5% of 3,000? And is there any advantage/ disadvantage of getting one which pays out interest monthly?

Thanks again!

I agree with Mike D about the mini cash ISA. You should use you ISA allowance if you are a taxpayer (over 18 I think).

I personally would put another £4K into a Mini stocks/share ISA, and them the rest of you monthly payments into a savings account like Mike D suggested.

It sounds to me like you should take a look at a regular saver account. These accounts allow you to pay in a fixed amount each month, hence the name. The only issue is that as these accounts typically offer headline grabbing high interest rates, there is a low ceiling on the monthly amount one can pay in. I have just done a quick best buy search on this website and the cap on contributions is more often than not £250.

If you have £6,000 ready to invest now, it is probably worth investing £3,000 in a Mini Cash ISA, which will give you tax free interest payments, assuming you are a basic rate taxpayer (i.e. you will get the gross interest rate). You are only allowed to invest £3,000 per tax year in one of these, so you'd have to put the other £3,000 in to another savings account.

I assume you are looking for instant access to your savings. If this is the case, simply check out the best buy tables and you can often set these accounts up through online applications.

In summary, there are a lot of options available to you. If you follow my logic above, however, the downside is that you would have three accounts and perhaps this wouldn't be ideal.

You could put the £6,000 in to a best buy instant access savings account, and then keep on adding the £500 to it every month through a standing order. The choice is yours.

Good luck though, Mark. I hope this advice helps and has not added to your confusion!

Mike

Hi all,

This is my first post and I have very little knowledge or experience with savings accounts/ investments, so any help would be much appericiated!

I have £6,000 to invest right now and want to add around £500 each month to it. Could anyone suggest an account/ investment that would offer me a good return.

Thanks in advance.