Since returning to employment two and a half years ago, my financial situation has (naturally) improved quite a bit and as such, barring my student loan, I don’t have any outstanding debts – both my overdraft and credit card are clear. Not only that, but I have enough left over at the end of most months top put a three-figure sum away in savings.
Until recently I’ve had two savings accounts. One was with National Savings and Investments, and is one that I’ve had since I turned 11 when I started getting cheques in my name as birthday presents and needed somewhere to put them; it also has a chunk of money saved for me by my late grandmother which I received when I turned 21. At its peak it had over £2500 in it, but it’s dropped down to £1400 after I pillaged it when I was unemployed in 2009. Whilst it originally had quite a good interest rate, it’s now dropped to 0.30% AER, which is less than the Bank of England base rate of 0.5%.
The second was with the Halifax, where I also have my current account, and was a web-only account which I opened last year once I started having enough money to put aside to save regularly. It’s now got over £1000 in it; when I opened it, the interest rate was 3.0% AER although it’s dropped to 2.3% – not great but still respectable. Access is restricted to one penalty-free withdrawal a year; any more will result in no interest being accrued for that month.
So, I’m keeping the second account, but the NS&I account needs to go – the interest rate is stupidly low. I also haven’t opened an ISA, which pays interest tax-free. Taking this into account, I opened an ISA with the Halifax which pays an introductory rate of 2.6% AER for 12 months – but this means that next year that drops back to 0.1%, so I’ll need to close the account and move the money elsewhere (probably into my other Halifax savings account). The main advantage with sticking with the Halifax is that I can manage it alongside my existing accounts online, and can move money between accounts instantly if I have to. Better rates are available elsewhere, especially if I were to lock the money away, but I’d rather have it on hand for a rainy day if necessary.
Conveniently I also received a tax refund from HM Revenue & Customs – a three-figure sum – so that’s going to sit in the ISA as well.
I’m hoping, now I have a fair amount of money in a place where I can actually gain interest, that I’ll have a bit of free extra cash soon. At some point Christine and I will want to buy a house, rather than forking out for rent every month, so we need to get some cash together for a mortgage deposit. With the economic climate still being rubbish, saving is a little difficult but hopefully there will be some returns on it.