What to do with money ???

Guys, I am having some money come my way possibly just before Christmas, although may be new year now.

It is not huge, but I was going to invest £5,000, but I do not know where.

I have briefly spoken to my bank, HSBC, and for this amount of money, they have suggested I should be looking at a one year tax free ISA.

Does anyone else have any ideas or recomendations ? I would like some options, but I do not want to many otherwise, like Hifi it can become confusing!

Thanks in advance

 

The wife and I had a spare bit of cash this time last year. Because we knew we would probably slowly spend it if we left it in a bank account we bought £5,000 worth of Premium Bonds, ( £2.5K each) . In almost exactly a year we have won £300 in prize money ( re-invested into PB's ) so that is about a 6% return. Not very high , however we haven't felt the need to convert the PB's into a holiday so far and it is kinda fun when you get a letter informing you that you've won a prize.

Well that is what I did with my my last spare £5K i'm sure you will get plenty of better investment idea's from some of the bankers on here...

Also if you haven't got an ISA savings account then you should get one. Again they are not massive money generating machines, however they are TAX FREE and anything you don't have to give to the revnue has got to be a bargain. We have an account each with the Dunfirmline BS, probably more because we know some of the staff in our local branch and they are very friendly

 

Rates are crap so Premium bonds-I invested £3k this year have won £200 so far!

 

Premium bonds are not 'investment'. They are playing, to be done when you are maxed out with all your tax free alternatives. Get a cash ISA.

 

The Bank had already suggested that Bob-I was merely offering an alternative

 

As has been suggested, look at ISAs.

I would recommend what natwest call an e-ISA - you can only access it through online banking, but the lower costs this gives the bank are passed on through getting a higher rate. It's a flat 5.84% gross, regardless of how much is in there, whereas a standard ISA will start out at about 5.25% and not get up to 5.84% until you have £27k in there (which would take 9 years, obviously).

If you use online banking, then there is a trick you can pull - as I do - using an online savings account. When I get paid I immediately put most of that money into the savings account (about 4% net). When the time comes, I pay the mortgage and credit card (full payment, as late as possible - max interest free time), and just keep a couple of hundred float in my current account. Any money I'm sure I won't need to access can go off into the ISA, but the rest might as well earn interest in the meantime, and this returns around £7-10 per month that would otherwise not, because the interest in current account is so low. Alternatively, there are high-interest current accounts available, but I was refused one due to my credit history (I don't borrow money, other than my mortgage. This gives me a very poor rating because I don't make a big profit for financial institutions (but they sit on enough of my money that they make more than enough imo).

If you are a 40% tax payer, then premium bonds are a good tax-free investment. The return averages 5-6%.

 

But premium bonds are not an alternative 'investment'. They are gambling with no guaranteed return other than your money back.

Meanwhile the National Savings direct ISA is offering 6.05%, tax free.

 

An alternative if you want longer-term investment but relatively little hassle is a equity tracker ISA from such as L&G, but only if you don't need to touch the money for at least three years.

 

Yes, they are. ISAs have the £3000 limit per year. What do you do if you want to invest £25000 tax free? Premium bonds have no guaranteed investment, but on average you will return, especially with a larger sum invested.

 

Thanks guys

Will let you know what I do.

 

when there was a limit of £22K on the premium bonds I had the full amount for several years, but I never won more than about £400 in a year, and sometimes only £150. I took half out as the deposit on a buy to let instead (and hey, watch that go through the floor...).

there are also tax free schemes for friendly societies over and above the ISA limit, but the returns are safe rather than spectacular, and lock your money up for a number of years

 

You could always invest in me, the money will be well spent and will go long way to boosting profits of Scottish and Newcastle

 

As Levi501 doesn't have £25000 he only has £5000 which he can invest in an ISA. £3000 cash and the rest in shares.

 

Have been pondering, my sort of inital thoughts are to put it somewhere I can gain access to it, then over the next six months really look for a house to buy.

Six months seems to be the thoughts as to if/when house prices may drop a little.