It’s taken a while but I’ve finally hit £10k in savings!
- Thread starter audioholic
- Start date
anandparvatham
New member
@audioholic Well done.
One thing I'd steer you towards doing research into, is a stocks and shares ISA.
It's smart to keen an emergency fund in cash, but you don't want to stockpile significant amounts beyond that, as they're better put to use in investments, where the "interest rate" (ie. returns) is usually higher.
A standard vanguard index fund, like an FTSE All World or S&P500 tracker, has returned 10% yearly returns on average (around 7.2% after inflation). Even at 5% interest in a savings account, this is more like 1% after inflation. Again, good for your emergency fund, but after that, I'd seriously look into index funds and the power of compound interest!
One thing I'd steer you towards doing research into, is a stocks and shares ISA.
It's smart to keen an emergency fund in cash, but you don't want to stockpile significant amounts beyond that, as they're better put to use in investments, where the "interest rate" (ie. returns) is usually higher.
A standard vanguard index fund, like an FTSE All World or S&P500 tracker, has returned 10% yearly returns on average (around 7.2% after inflation). Even at 5% interest in a savings account, this is more like 1% after inflation. Again, good for your emergency fund, but after that, I'd seriously look into index funds and the power of compound interest!
@anandparvatham 100% something worth doing, Cash ISA will only get you so far and S&S ISA will still give you access to your cash quickly if needed. Obviously everyone’s risk appetite is different but a tracker fund over the long term outperforms savings easily
resjudicata
New member
@anandparvatham How did you get to 1% figure after inflation?
anandparvatham
New member
@resjudicata Depending on which inflation rate you take, RPI, CPI, etc they’re all around the 3.8-4.3 mark. If a savings account is 5% returns, but inflation is 4%, then the net return is only 1%.
Many people not utilising the highest interest rate savings accounts going, will more than likely actually be losing their spending power to inflation and have a negative return on their cash holdings! This is pretty much everyone with a 3% savings account interest rate or lower.
Many people not utilising the highest interest rate savings accounts going, will more than likely actually be losing their spending power to inflation and have a negative return on their cash holdings! This is pretty much everyone with a 3% savings account interest rate or lower.
resjudicata
New member
@anandparvatham 4% just seems quite high.
anandparvatham
New member
@resjudicata Latest ONS figures have it at 3.8% for the past 12 months up to the end of March 2024.
…and that’s come down quite a bit from this time last year, when it was almost double that!
…and that’s come down quite a bit from this time last year, when it was almost double that!
resjudicata
New member
@anandparvatham I see. Makes me wonder, is it better to pay off my 5% mortgage on overpayments each month or put that money into 5% savings account?
anandparvatham
New member
@resjudicata If its exactly equal, I'd personally pay off the mortgage (provided you already have a 6 month emergency fund, and no other consumer debt, credit cards, loans, etc).
If you get to the point where savings rates are higher, then theoretically it'd be more efficient to save then.
If you get to the point where savings rates are higher, then theoretically it'd be more efficient to save then.
resjudicata
New member
@anandparvatham Well my understanding was it’s better to put into savings if it’s more than 5% as higher than my mortgage interest. Plus due to inflation my mortgage would be much easier to pay off in say 10 or 15 years when inflation is higher still, but if that 5% savings account is actually 1% in real terms then surely it’s makes a lot more sense to pay off the mortgage?
anandparvatham
New member
@resjudicata Yes, that's what I said.
If your mortgage is 4% and your savings rate is 5%, then mathematically, you're better saving vs overpaying your mortgage.
If its the other way about, then you're mathematically better off paying the mortgage off sooner vs saving.
What actually is your mortgage rate and savings rate?
I personally don't expect savings % rates to stay ahead of inflation. We're in a unique case this year because inflation has come down further than expected, so I am sure when the banks set the interest rates at 5%, inflation was still around 6%.
I expect the banks to start dropping interest rates as new updates to inflationary figures and the Bank of England base rate starts to drop again.
So it might be that if you're fixed equally at 5% in the mortgage for the next 5 years, your savings account % will start to go down next year and the year after, if inflation and BoE base rate start to fall. The base rate is currently 5.25% and BoE predict it'll fall to 1.9% by 2026. If so, I'd imagine we'll see savings account % rates also fall to 1.5-2% again.
If your mortgage is 4% and your savings rate is 5%, then mathematically, you're better saving vs overpaying your mortgage.
If its the other way about, then you're mathematically better off paying the mortgage off sooner vs saving.
What actually is your mortgage rate and savings rate?
I personally don't expect savings % rates to stay ahead of inflation. We're in a unique case this year because inflation has come down further than expected, so I am sure when the banks set the interest rates at 5%, inflation was still around 6%.
I expect the banks to start dropping interest rates as new updates to inflationary figures and the Bank of England base rate starts to drop again.
So it might be that if you're fixed equally at 5% in the mortgage for the next 5 years, your savings account % will start to go down next year and the year after, if inflation and BoE base rate start to fall. The base rate is currently 5.25% and BoE predict it'll fall to 1.9% by 2026. If so, I'd imagine we'll see savings account % rates also fall to 1.5-2% again.
resjudicata
New member
@anandparvatham My mortgage and saving account are both at 5%. Thing I was asking was if it’s 5% saving but in reality it’s 1% after inflation then how does that compare to mortgage and inflation differences?
Didn’t realise it’s predicted to go down so much to 1.9% by 2026. I remortgaged to 2029 at 5%
Didn’t realise it’s predicted to go down so much to 1.9% by 2026. I remortgaged to 2029 at 5%
handicapco
New member
@anandparvatham How quick are withdrawals from a S&S ISA? It's one of those things I'm interested in but just don't quite understand.
anandparvatham
New member
@handicapco You can sell stock during market hours, normally Monday to Friday 8:30-4 for UK stocks and basically the same hours (think it might be 9-4:30pm US eastern time) for US stocks. Some platforms give you access to out of ours trading.
But in short, generally - day time hours Monday to Friday.
Once sold - it's sold instantly but the platform itself may take 1-2 days to transfer the funds to your bank account.
But in short, generally - day time hours Monday to Friday.
Once sold - it's sold instantly but the platform itself may take 1-2 days to transfer the funds to your bank account.
nicolehaganjones
New member
@handicapco I took £50 to test mine last month (trading 212) it withdrew it into my uninvested funds within the hour and then I could withdraw it into my bank which happened overnight 
gezzamacoz
New member
@audioholic I’ve been in a very similar position and I know how hard it is to get out from under. Well done!
I have £7k currently in savings and the goal is to hit 10k this year. I feel pretty confident I’ll smash the goal. Trying to save £700-£1000 per month
I have £7k currently in savings and the goal is to hit 10k this year. I feel pretty confident I’ll smash the goal. Trying to save £700-£1000 per month
@audioholic Congratulations, you should be really proud. Well done mate 
@audioholic congratulations on turning things around, brag away lol.
the only thing i would advise is open your lisa now with £1 just to get the ball rolling as you can’t use the money for the first 12 months towards a house. i know you might not be thinking about home ownership right now, but things can change between now and march 2026
the only thing i would advise is open your lisa now with £1 just to get the ball rolling as you can’t use the money for the first 12 months towards a house. i know you might not be thinking about home ownership right now, but things can change between now and march 2026
@audioholic Congratulations!
Agreed on the other comments about keeping things private to yourself. You never where things will lead if other know.
Keep going, make yourself more financially comfortable and you’ll soon discover some of life’s other stresses aren’t so stressful anymore.
Agreed on the other comments about keeping things private to yourself. You never where things will lead if other know.
Keep going, make yourself more financially comfortable and you’ll soon discover some of life’s other stresses aren’t so stressful anymore.
ninesnowflakes
New member
@audioholic Not a brag at all, congratulations!