Money Insider: A balanced way to earn money from a £5,000 savings portfolio
Saturday 29 May 2010
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.
Fuel poverty could kill 100,000 vulnerable people over the next 15 years, charity warns
Bargain Hunter: Affordable art - suddenly being a collector is just a walk in the park
Phoenix Life: Chance of a refund for overcharged policyholders has risen
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
Simon Read: That's right, BT, they'd rather pay for a free service
- 1 Michelle Rodriguez: Fast & Furious actor apologises after telling 'minorities' to stop taking on 'white' roles
- 2 Raif Badawi, the Saudi Arabian blogger sentenced to 1,000 lashes, may now face the death penalty
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 Robert Mugabe eats a zoo for 'obscene' 91st birthday party
- 5 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
New theory could prove how life began and disprove God
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
Russia's roadmap for annexing eastern Ukraine 'leaked from Vladimir Putin's office'
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads