Money Insider: A balanced way to earn money from a £5,000 savings portfolio

A balanced savings portfolio ticks all the boxes. With interest rates offering miserable returns, it's understandable that some people may have all but given up saving in the current climate.

However, building a savings nest egg remains a sensible strategy even when interest rates are low. So if you've got £5,000 to save, where should you put it?

First, it's important to keep some of your cash in an easy access account for emergencies – somewhere that you can get your hands on it quickly if needed.

At the same time you should look to take advantage of your annual taxfree savings allowance, so it may be that you initially keep your emergency fund in an instant access Isa and kill two birds with one stone. The Golden Isa 2 from Barclays paying 3.10 per cent (ends 1 June) or Nationwide Building Society e-Isa at 2.75 per cent free of tax are worth considering as a home for the first £1,000 of your savings, giving you instant penaltyfree access when you need it.

The next step for the remainder of your savings is to look longer-term with fixed rate accounts – more often referred to as bonds. Because you don't have access to your cash for the term of the bond (anything from six months to five years) the trade-off is that you receive a higher rate of interest than you'd get with an easy access savings account. However,while you don't have access to your capital, many bonds will give you an option to receive the interest on a monthly basis if that's what you prefer.

Once again you're faced with more choices and decisions to make. Interest rates on fixed-rate bonds have fallen slightly in the last few months. However, the biggest dilemma is how long to invest your money for. The temptation is to opt for the highest rate, although this would result in you having no access to your money for a full five years. With base rate still at a record low of 0.50 per cent, rates will start to rise again at some point, but what we don't know is quite how soon and how quickly this will happen.

The rates on offer for two- or threeyear bonds look quite attractive, and although you can currently bag an extra 0.75 per cent for a five-year fix, that decision may come back to haunt you if rates were to rise by say 1 or 2 percentage points in a couple of years from now.

So with the remaining £4,000 of your savings, if you're positive that won't need to use it for some time, you could divide it as follows:

* £1,000 with Kent Reliance BS for a one-year term at 3 per cent;

* £1,500 with State Bank of India for two years at 4 per cent;

* £1,500 with Coventry BS for three years at 4.2 per cent.

By spreading your fixed-term savings, you will get a better overall return than by just putting it all in a bond for just one year. This strategy also means that every year for the next three years you will have a savings bond maturing and the option to fix again, perhaps in a new fixed rate Isa, for a term that suits your circumstances at that time.

In the meantime, if you want to continue building your savings, take a look at the new branch-based regular savings account from Northern Rock. The account allows you to save up to £250 per month, gives you penaltyfree access to your cash and pays a table-topping 5 per cent gross fixed for 12 months.

This suggested savings portfolio may not be the right scenario for all savers as it will depend on your own tax status, the amount you have to save and access you require to your cash, but it's a pretty good base from which to start.



Premature end for Child Trust Fund

While there was undoubtedly an urgent need to reduce the budget deficit, the seemingly hurried decision to scrap the Child Trust Fund this week has to be questioned.

The £520m annual cost saving may earn the Government a few brownie points with some supporters. However, it was a shortsighted move to axe a savings scheme that could have given such a vital financial boost to the next generation.

If the CTF had been introduced in 1992, those with a CTF maturing this year would be able to use their lump sum to offset the rising cost of higher education or even put it towards that now seemingly impossible deposit required for their first home.

Had the scheme been allowed to continue, come September 2020 when the first accounts would have matured, there would have been a stream of 18-year-olds entering adult life on a much sounder financial footing than previous generations – did it really make economic sense to wipe that out in one fell swoop?

Andrew Hagger is a money analyst at Moneynet.co.uk.

News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
PROMOTED VIDEO
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
sportColombian World Cup star completes £63m move to Spain
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Programme Director - Conduct Risk - London

    £850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

    Business Analyst (Agile, SDLC, software)

    £45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

    Finance Manager - Bank - Leeds - £300/day

    £250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

    Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

    £100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

    Michael Jamieson: Why weight of pressure rests easy on his shoulders

    The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn