What is the point of saving

[kaymar]

We've got monthly savings accounts with M&S Bank, which pay 4.5% net. The downside is that you can only save a maximum of £250 per month into them and can only have one such account each.

When I was training for the financial services industry, we were told that a sizeable portion of the client's money should be put into Premium Bonds. My feeling is that this MAY work if you hold the maximum number permitted but at the end of the day, each bond is only worth £1, which on encashment is worth less than the £1 it cost to buy - so an overall loss. I was given four as a small child and have never won anything. Because of inflation, and the cost of postage, it's not worth encashing them. It's not a product I would recommend.

Buy to Let properties rely on always having a tenant, and one who won't trash the place. Having a letting agent should reduce the risk of this, but then you'd have their fees to deduct from the rental income. As owner, you'd be responsible for the upkeep of the place and, if there's no tenant, there's no income. Can be risky...

Equities go in 5 or 10 year cycles, as a rule of thumb. If you save monthly, you benefit from "pound cost averaging" as, when the price of each unit goes down, you buy more units, which mean you have more units to benefit from the increase in value when the price goes up. Conversely, when the price goes up, you buy fewer units. It is preferable to buy into a unit trust, rather than shares in individual companies unless there is a material or sentimental reason for buying them (Carnival - free OBC ). For those who don't know what a unit trust is, it's a collection of shares managed by a professional who buys shares in individual companies in a particular sector. So, for a very simplified example, if he manages a fund investing in, say, British supermarkets, he'll look at the performances of all the supermarkets and buy shares in the strongest performing. If Aldi looks like it's going down the pan, he'll sell and reinvest in, say, Morrisons. You, the investor, probably won't know any of this, you just know that you are investing some of your money in UK supermarkets. If you were doing it yourself, you'd have to be constantly checking share prices and buying and selling yourself, which is time consuming and expensive, as the fund manager can command big discounts in dealing charges that we couldn't get. Some trust funds are deemed "low risk", others are "high risk". "High risk" means that the prices are very volatile but the rewards can be very high. When I started in the industry, one of my boss's clients had invested in Technology and her investment had increased in value by 600% over a short period of time. Then the "technology bubble" burst and she ended up with a fund valued at about 40% of the initial investment - a big loss.

There is no such thing as a "no risk" investment - ALL investment vehicles - stocks and shares, building society accounts, ISAs, whatever, carry a degree of risk.

Precious metals are always good but, again, can be risky. I bought into a fund dealing only in "physical gold" (this is different to general gold funds - it means that somewhere there is a block of gold with my name on it) - it made a modest gain in the first few months, then sank back to an overall loss of about 10%. Because of the uncertainly caused by Brexit, it's back up to +15% of my original investment. Palladium has gone up nearly 50% in the year since investing. Physical silver has gone down BIG time - about 40% but this is expected, in the next couple of years, to rocket in value.

You should not invest in anything expecting a quick return. Always look at long term - ie 5 years or more, preferably 10. Younger investors should have a small proportion of their investment portfolio in higher risk funds, a chunk in low risk and the bulk in medium risk. As they get older, exposure to higher risk should be gradually reduced into medium risk and, in the 5-10 years before retirement, start moving that into lower risk funds, perhaps even going into a cash fund towards the end. Unless you know what you are doing, always take professional advice regarding which fund(s) are the best for your particular circumstances (and don't come to me, I'm no longer qualified and was never authorised to advise)

Absolutely, S.S., it's all about risk v reward, diversity and adequate liquidity for potential short-term needs. With adequate research and common sense or reliable professional advice, there are still decent returns to be had

[Silver_Shiney]

Things have changed dramatically in the rental market in recent years Alan, most of the letting agencies have waiting lists of clients wanting to rent as they can't afford to buy. Earlier this year I was doing a job for a cousin of mine and as I was wheeling the mixer from my trailer I was asked by two different people if I was doing the house up to rent.

As for someone trashing the place if you are renovating a house for rental you don't put top quality fittings in if you have any sense and if the property is managed well you should have no problems.

Indeed, Ray, but the point I was trying to make is that it CAN be risky. My daughter can easily afford a mortgage, but the problem is raising the deposit - a difficulty faced by thousands across the country. Consequently, they struggled to find a place to rent, and are paying more in rent than they would on a mortgage. The housing market is long overdue a major slump and, when it happens, people will be able to buy once more leaving the buy-to-let investors with a potential loss of income but still with outgoings on the empty property.

Also management companies may not adhere to the standards required. What do you do if the tenant trashes the place as they leave and does a runner?

As you say, you don't furnish it with your best antiques!

[oldbluefox]

I don't know your daughter or her circumstances Alan so it would be unfair to comment on her situation. However this inability by the young to raise a deposit baffles me. Up my way you can get a very nice terraced house for £85-£100k. Assuming a deposit of 10% it should not be difficult to achieve when you consider the lifestyle these youngsters lead. It just means they may have to forgo some of their pleasures and put more into savings. Or am I not fully understanding?

[Silver_Shiney]

I don't know your daughter or her circumstances Alan so it would be unfair to comment on her situation. However this inability by the young to raise a deposit baffles me. Up my way you can get a very nice terraced house for £85-£100k. Assuming a deposit of 10% it should not be difficult to achieve when you consider the lifestyle these youngsters lead. It just means they may have to forgo some of their pleasures and put more into savings. Or am I not fully understanding?

If only housing was that cheap round here...

Her wedding a couple of years ago and a baby have helped knock a big hole in their savings.

My other daughter and her husband were both earning good money but they couldn't reach the required deposit. They've now emigrated and, after giving themselves a year to settle in, reckon on being in a position to buy a modest house for cash, or a decent place with a mortgage that would be adequately serviced by her part-time income alone!

[GillD46]

Our second daughter lives in London. Buying a modest one bedroom flat in Walthamstow three years ago cost her going on £215,000. The deposit required at that time was hefty, far more than 10% and she works for the NHS so isn't amazingly paid, so we stepped in to top it up.

She now lives with her partner in Islington (where it is even more eye wateringly expensive) and rents out her flat. The rental income is 50% more than her mortgage, allowing for her tax committment, and on a recent valuation, and confirmed by the sale of the flat above her, her flat is now worth £425,000! Almost doubled in value in three years! Scary.

[kaymar]

I don't know your daughter or her circumstances Alan so it would be unfair to comment on her situation. However this inability by the young to raise a deposit baffles me. Up my way you can get a very nice terraced house for £85-£100k. Assuming a deposit of 10% it should not be difficult to achieve when you consider the lifestyle these youngsters lead. It just means they may have to forgo some of their pleasures and put more into savings. Or am I not fully understanding?

That's true, obf, and what a lovely part of the world in which to live. Of course, the only problem with buying a house in Cockermouth is that they would have to factor in the cost of a rubber dinghy

Sorry, that's not really funny, is it?

[Raybosailor]

Buying to let with a mortgage can be a big risk as the interest on the mortgage eats into the equity of the property and as Alan says there could be a housing slump where you could end up with minus equity, but I thought we were talking about savings here, so people with enough savings to push them into the interest tax bracket might want to think about it.

If you live in an area that has high property prices there's nothing to stop you buying a property where the prices are more realistic, your not going to live in it your going to rent it.

[kaymar]

We've got monthly savings accounts with M&S Bank, which pay 4.5% net. The downside is that you can only save a maximum of £250 per month into them and can only have one such account each.

I got quite excited about this, SS, until I looked it up.

* Only available if you transfer your current account to them.
* Maximum term 12 months
* Maximum savings £250 p.m.
* Therefore maximum interest £96 gross - hardly worth the time and trouble?
* But even worse, it's not available where we live.

Ah, well, it was a nice thought

[sunseeker16]

Most things which seems to good to be true turn out to be just that
... yes, I went off and looked too

[Raybosailor]

We've got monthly savings accounts with M&S Bank, which pay 4.5% net. The downside is that you can only save a maximum of £250 per month into them and can only have one such account each.

I got quite excited about this, SS, until I looked it up.

* Only available if you transfer your current account to them.
* Maximum term 12 months
* Maximum savings £250 p.m.
* Therefore maximum interest £96 gross - hardly worth the time and trouble?
* But even worse, it's not available where we live.

Ah, well, it was a nice thought

The idea for these accounts is to use the spare cash after you have reached the max in other accounts, better earning something rather than next to nothing.
You just start a new one after the 12 months is up.

[GillD46]

I have the same thing with HSBC but it's 6%. Tony doesn't have one as by the time he takes 40% tax off, it isn't so great.

[Raybosailor]

I have the same thing with HSBC but it's 6%. Tony doesn't have one as by the time he takes 40% tax off, it isn't so great.

The HSBC monthly saver at 6% is actually worse than the Lloyds monthly saver at 4% due to the limits on monthly and maximum deposit.

[GillD46]

Gosh, what can you save with Lloyds then? I thought most of them were capped at £250 pcm. Anyway, we don't have a Lloyds a/c.

[towny44]

I have the same thing with HSBC but it's 6%. Tony doesn't have one as by the time he takes 40% tax off, it isn't so great.

The HSBC monthly saver at 6% is actually worse than the Lloyds monthly saver at 4% due to the limits on monthly and maximum deposit.

Ray, I think the Lloyds interest rate is now down to 3%, but you can pay in up to £400 per month, giving £77, £250pm at 6% gives £96, and of course you would have to have the extra £150 pm surplus as well.

[Silver_Shiney]

For some reason, I cannot seem to interest anyone in investing in the Whiney Wine fund - guaranteed 100% liquidity by closing time...

Seriously though, as we get older, the opportunities for getting a return that outstrips inflation by a wide margin are becoming fewer and fewer

[Raybosailor]

I have the same thing with HSBC but it's 6%. Tony doesn't have one as by the time he takes 40% tax off, it isn't so great.

The HSBC monthly saver at 6% is actually worse than the Lloyds monthly saver at 4% due to the limits on monthly and maximum deposit.

Ray, I think the Lloyds interest rate is now down to 3%, but you can pay in up to £400 per month, giving £77, £250pm at 6% gives £96, and of course you would have to have the extra £150 pm surplus as well.

I was going on the issue that I was on Towny at 4% but your right the new issue is reduced to 3%, I can't see me switching to an HSBC Premier account to qualify for the regular saver as its no good to people over 70.

[towny44]

I have the same thing with HSBC but it's 6%. Tony doesn't have one as by the time he takes 40% tax off, it isn't so great.

The HSBC monthly saver at 6% is actually worse than the Lloyds monthly saver at 4% due to the limits on monthly and maximum deposit.

Ray, I think the Lloyds interest rate is now down to 3%, but you can pay in up to £400 per month, giving £77, £250pm at 6% gives £96, and of course you would have to have the extra £150 pm surplus as well.

I was going on the issue that I was on Towny at 4% but your right the new issue is reduced to 3%,I can't see me switching to an HSBC Premier account to qualify for the regular saver as its no good to people over 70.

We get these with our HSBC advance account which is a no fee account, and we are both over 70.

[GillD46]

Yes we downgraded to an Advance a/c from a Premier a/c when they changed the rules. We were unwilling to leave so much money in savings with them - £50,000 if I remember correctly. Had their rates been competitive we might have done, but they weren't!

We pay nothing for the Advance a/c because as John says it doesn't have a fee.