ISA Mong

Discussion in 'Finance, Property, Law' started by Alpha72, Apr 1, 2010.

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  1. Hey all, was having a discussion with the lads in the office today and I mentioned I have just started saving up for the future etc I am doing this via budgeting each month and keeping all that was left over in my regular account. The boss stated this was "lunacy" and suggested I at least get a cash ISA which would be better than leaving it in my regular account.
    Then of the ones lads piped up and explained to me if I did it now it would not cut into the financial years "allowance" or what ever it is called. (I am led to beleive it is something in the order of £5100?)

    So I leapt in the car after being knocked off and went into my local branch. Got their basic cash ISA with a 2.6% AER (what is that?) and deposited £1200 in it after batting off their attempts to make me do "medium risk investments" or something or other.

    My question is, at 2.6% AER. How much interest will accumulate per month? It can't be 2.6% a month... they aren't going to give me £31.20 a month obviously. So much does that work out a month? (I plan to add £700 a month untill I use my allowance if that matters)

    I realise I should have asked the nice lady in the bank this but it is too late now. Any advice/info will be appreciated
  2. AER is the Annual Equivalent Rate, so the %age is what your money will earn if you leave it untouched for a year. Unless part of the rate is a "bonus" for no withdrawals in the year (this will be in the terms and conditions), then you can just divide by 12 for a monthly rate. The T&C should also say when interest is paid (normally annually, or monthly in arrears).

    If you're planning to stick with this account, remember to check it's interest rate this time next year. Banks have a nasty habit of baiting ISA accounts at this time of year, and often slash rates after the first anniversary.
  3. Thank you for the help folks, cleared up!
  4. If you are saving for the future then you need to get more than 2.6% as inflation is currently above 3%. Why don't you get a self-select shares ISA with dividend reinvestment. You could get a tracker ETF which would have lower fees than any products that the banks would offer you. Through the joys of compound interest you should get a good return over the longer term.

    I use - no trading fees or annual fees if you set up a regular investment account, and they have good articles for beginners.

    Have a look at for an easy explanation of ISAs and also look at

    The banks offer such crap rates at the moment that unless you put it in shares or bonds you might as well spend it! Shares are a bit of a headfcuk to start but once you get a basic understanding of what is available then it's not too difficult - but the risk is greater.
  5. The way things seem with interest rates and the like, it feels like there is no point even putting my money into any savings scheme. I am lacking in knowledge when it comes to investing, but I have a decent amount of money literally doing nothing for me right now.

    What could I do with this sum of money right now for the long term benefit? I wouldn't need to touch this money at all and could easily put it away for 5 years.
  6. What return do you want to get and what risk are you willing to take? I would advise that you read "The Financial Times Guide to Investing". I was in the same position as you a few months ago and knew nothing about companies, shares, bonds, sipps or ISAs - I've now put together a long term ISA shares portfolio which I will build on in the coming years. It was all really straightfoward once I knew what all the terms meant.
  7. 2.6% in an ISA is equivalent to 3.12% allowing for tax free status (@20% - could be more depending on your tax rate). It's not a great return, but unless you are absolutely sure you can leave your dosh untouched for the longterm (5+ years), it's not such a bad place to start.

    It's a personal decision, but unless/until you have somewhere between 2 - 6 months salary saved in something instant access, you might want to steer away from locking up money for longer (as penalty for early withdrawal can wipe out all interest). Using the ISA wrapping on cash is also worth it in itself for the tax protection (which could become more significant should the state of the economy lead to higher taxes). Moving to better rates is possible (though administratively over-complicated), and accounts should be reviews fir their competitiveness say annually - especially if interst rates start rising (anyone else here remember 15% in 80s: great for savers!)
  8. Let's say I have a sum of money, and I have 2/3 of that available to put away for saving. The remaining 3rd is substantial enough for me not to have to touch what's in the savings. As for risk, minimal really, I'm not a gambler by nature and would flip out if my savings went down the pan.
  9. ISA are supposed to be tax free saving, savings that you have from monies earnt and paid tax on. If you leave the money in a building society again you pay tax on any profit made.
    My financial advisor keeps pestering me to buy more each year,but after the last 18 months any profit I made had been whiped out. Buying them now is wrong as the stock market is as high as it's been for two years, you only make a profit if the FTSE rises. I bought £2k worth of ISA's the week before gulf war 2 when the markets were at rock bottom, after our swift victory the markets rose infact almost doubled their value and my £2k was worth nearly £3k-until last year. All my other ISA's have always struggled to make a gain.
    I'd rather over pay my mortgage (with rates so low)and knock years off the redemption date.
    Or buy shed loads of Lotto tickets- got to be in it to win it right?
  10. Santander have an isa that is 3.5% and will gaurantee it goes up when the rate does but will not fall - 5 magic beans?
  11. Santander one is for new cash only, and rate falls to 0.25% after first year. Only use it if you'll remember the account birthday!
  12. That's exactly what the government want you to do - spend not save as they bail everyone out mortgaged to the hilt. I can't really offer any suggestions for investing though I'm sticking with the Recession Beating Portfolio - even though the stockmarket has considerably outperformed it :(
  13. [align=center]I'm an IFA, but if I make a comment about financial stuff, it is a general comment for discussion purposes only and should not be taken or acted or not acted upon as if it were advice. You should always obtain independent financial advice based on your own circumstances.[/align]

    the "three bucket theory" may be a good place to start in terms of managing your money - serch it on google for a few ideas

    1. An emergency fund - easily accessible, keeps pace with inflation
    2. A Planned purchases fund (holidays, computer, car etc) - easily accessible but usually in a notice account
    3. Long term or retirement fund - long term tools, such as pensions and investments

    Cash ISA's are tax free, stocks and shares ISA's technically aren't totally tax free.

    This cartoon explains a bit about how these things work
  14. I think I am just going to withdraw all my monies and keep them in a briefcase.