Hi all,

Need some advice re: the above.

I’ve just started my first job out of uni. 2 queries – what to do with savings, and how to do day-to-day transactions.

I currently have a Natwest Graduate account, which gives me a £2k interest free overdraft for 1 year, and £1k for the second year.

1. I have to pay my parents back around £5k, but it does not have to be paid back in instalments, or in a particular rush (I’d like to do it well within 2 years though).
I plan to “save” up £500 each month from my pay, to either go to my parents, or to go towards holidays etc – normally going towards parents though of course.

I would just stick the £500/month in an ISA, let that get a bit of interest, and then pay my parents back from that when I have saved enough. However, I know I will want to dip into the account at least a couple times a year (holidays etc), so not sure an ISA will work. Are there any other ISA-like accounts with reasonable interest rates, which allow me to withdraw from it?

I guess one option would be to keep an amount in my “normal” account so that I never need to dip into the ISA, but would rather keep all my “savings” in one place..

2. I have my Natwest Graduate account (which also comes with a credit card) – but are there better options for day to day spending, with cash back etc? I may as well max out the overdraft of the Graduate account while it’s interest free, and put it wherever I put the savings.

So, any thoughts on the best way to do things? Any thoughts would be much appreciated!

Or…. Just use my existing Natwest account and be done with it…?

Thanks,
Duane.

The ISA is primarily a Tax Free savings scheme, not really good for dipping in and out of. Take a look at the interest rate it’s tiny, there will be some good returns but mostly on long term deposits that you can’t touch.

Unless you are sure you can repay the credit card balance every month avoid it to start with also avoid going below zero if you can in your current account. Just because they want to lend you 2k doesn’t mean you should use it. Think of it more like an emergency fund.

Set up 2 savings accounts 1 called parents and 1 called holiday. Pay your cash into there just to get it out of your bank acount. If you do it on Pay day then it’s gone from the start, if you really need it you can transfer back – treat that like your overdraft.

The idea of offering you cheap/free credit now is so that you keep using it and then when it’s not free they cash in or at least keep you as a customer.

Regular saver from first direct will give you 3% over the year gross which is as good as any ISA if you max it each month. £300/month into that will see your parents paid back at the end of year 2 with a chunk of play money left.

Put the other £200 in a basic savings account with your current bank for simplicity, holiday & bike fund. Santander offer decent cashback on their current account.

ISA could work…there is a paying in limit of £15k per year so at £500 a month you are expecting to pay in £5k. So you could draw it all out halfway through for a holiday and still have plenty of your ISA allowance left to keep paying in.

If you wanted to pay in £15k then you would avoid drawing out of it. The following year you can treat the cash as ‘locked in’ to repay parents whilst you start on the new ISA allowance.

Edit – £6k per year 🙄

And they may only pay interest on the balance at the end of the year so money you draw out could be 0% interest… I’ve not looked for a while.