Finance, Savings

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Dealing with savings.
This is a suggestion about how to deal with savings, it is not advice or a recommendation.
It should apply to a most people but of course for some it will not be applicable.
It relies on good and regular on-line access and continuous monitoring.


Day to day expenses

First of all look at your curent account institution.
Check out e-saver accounts with them.
The rate probably won't be high but it's money for very little effort.
If you check your account on-line every day then you can keep very little in the current account and transfer when it goes into debt.
If you don't check daily then look at your outgoings and decide how much to keep in the current account.
Warning - don't keep it too low as you may not be able to acccess the web site and so might not be able to transfer for a day or so.
Take an overdraft facility if it is free just in case you make a mistake.

I would keep more money in these too accounts than you need for a month (or between salary payments).


Short term savings

Next look at slightly longer term savings. Open high intrest rate savings accounts.
Look at Icesave, Birmingham Midshires, ICICI, Egg

Transfer any money that you might not need within a couple of days to these accounts.
I would allow at least 5 days for transfer to your current account although it may be quicker especially with recent changes.
I would open at least two and split the money fairly evenly just in case one of the sites is inaccessible.
I include Egg although it is a lower rate because I think it is probably reliable.
ICICI is a high rate but I don't like it's reliability or lack of customer service.

Longer term savings
Open a cash ISA and transfer any money that you don't need for a year into it up to the max of 3600 for a tax year.
Remember that money in a cash ISA can be withdrwn but any withdrawals reduce the allowed limit so best to be  avoided.

I would wait until you have 2-3 months salary stable in short and long term savings before considering anything else.


Pay off mortgage

Now you can consider paying off your mortgage.
Don't try to stretch yourself here and check your mortgage conditions.
If the mortgage allows payment holidays or withdrawals then you can be more bullish.
Make sure you avoid the possibility of a downturn in your finances meaning that you use up all your savings and cannot access mortgage overpayments.
Remember that due to inflation and wage inflation the value of your mortgage will naturally reduce over time.


Fixed Term Savings

Check out fixed term savings - these will fluctuate and can be a good idea.
Look at NI indexed link certificates. Money is always accessible but gets no interest in the first year. After that interest is monthly.
These are tax free so especially good for higher rate taxpayers


Other possibilities

Look at regular savings schemes - these can give very high interest but look at the conditions.
Check out your mortgage - if it allows an offset then use that in preferance to the short term savings (but keep another account in case of access difficulties).
If you have a flexible mortgage then chack the access times and consider using it a bit earlier.
Do not take out a flexible or offset mortgage for applying small amounts - it will almost certainly work out to be a poor deal.
Check the interest rates - usually offset mortgages are only useful if you can offset almost the entire mortgage amount and think yo might have a need for the money in future
(At which point you would probably change to a different product unless the withdrawal is short term). 
Premium bonds - usually a poor return but a bit of fun and you might be lucky (better than the lottery?)


Investments

I would say consider these after you have saved the 2-3 months savings in the above.
Maybe start with a stocks and shares ISA a bit earlier but with small amounts.
If you have a pension then check it's conditions - any employer contributions are probably valuable but don't stratch yourself too much.


Warning

I believe this method would give a good return for most people but it takes discipline.
For some people the incentive of paying of fhe mortgage outweighs most other considerations.
For some having money easily accessible is too much of a temptation.


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