Optimise Your Savings Part 1 // The House Diaries

One thing that is the same for almost everyone is that you need savings to buy a house. Back in the day, you did not actually need any money to get a mortgage, but things have changed. When it comes to buying a house, the bigger the deposit you have means the lower your monthly repayment and/or the greater the house value you can afford.
Moving costs money. Every aspect of it: the literal moving of the furniture, fees, checks, repairs etc. It is not cheap and some money will feel as though it is going straight down the drain, so when you have your deposit saved, some of that will be required to go towards house buying fees, so you always need to save as much as possible to put yourself in the best position

Introduction

This is a personal account of how I have saved my money. Currently all of my debit and savings accounts are with Nationwide Building Society, and I have one credit card with Tesco Bank. Over the years I have compared different banks and building societies, and I have found that Nationwide has the best rates for me, and as they are a building society, rates are better than banks as the fees are different. This is a two part post - the first part looks at how I personally save, and the second part will investigate other options of savings. If you do decide to swap to Nationwide, give me a shout because their switching service rewards you with £100 each (me and you)!

Just to give you a rough idea, currently my annual income is £14,000 and I live at home with my parents. I am lucky enough not to pay rent, but I do have a lot of expenses, especially when it comes to travelling to and from placement and work. I am entitled to a student loan, which I get about £3500 a year for. As I explained in my previous post, I am looking at moving out and renting for a year, and when that happens, it is likely that my current situation will change. Our different lives mean that we can afford to save different amounts, but it is worth saving even the tiniest amount of money and getting your foot in the door, as I will explain later in this post.

Current Account

I currently have a FlexPlus Account with Nationwide which I have held for a couple of years now. Before that I had a free FlexOne account which was for 11-17 year olds (which now you get interest on which is fab), and then I had a normal, free FlexAccount which is just a standard debit card. Nationwide also offer a FlexStudent account which gets you 1% interest too.
I pay £13 a month for my FlexPlus account which sounds like a lot for a debit card, but actually it was an educated decision. As I try to hold a good amount of money in my account, I receive 3% interest on amounts up to £2500, so usually each month I receive £3 back in interest (interest is paid monthly). This makes it work out at approximately £120 per year that I actually spend on my account. The account also comes with breakdown cover (so I cancelled my old breakdown service, and I have used the breakdown cover twice in the last couple of years), mobile phone cover (last year I completely killed my phone and paid £50 and got a brand new iPhone with no questions asked), and holiday insurance which includes winter sports (I have never needed to by holiday insurance, it covers me and everyone I travel with and winter sports upgrade can be really expensive!). So when you look at the current account like that, I think that I am actually saving a crazy amount of money.

I get all of my earnings paid straight into my current account. From here, I pay for food, bills, gym membership and petrol, although a lot of these costs come out in arrears as I do most of my spending on my credit card. I ensure that I earn enough every month so that I do not get caught short money wise. I have set up money transfers on the first day of the month into two of my savings accounts: Flex Regular Saver and Help to Buy ISA. The rest of the money I earn sits in my current account until I have over £2500 (as then it stops earning me interest) where I will then put it into savings, unless it gets spent on something else first.

Savings

I have two savings accounts: my Holiday Fund and my Flex Regular Online Saver. Savings accounts which are not ISAs have some form of tax that you pay on them, but you do not see this money go out, it is deducted from your interest.

My Holiday Fund is a Loyalty Saver (5 year) account, which is why I suggest you get your foot in the door early. As I have been a customer of Nationwide for over five years now, I am entitled to higher interest savings accounts. This is not an amazing interest rate, but it is an account that me and my boyfriend pay into every month so we have some money in the bank for when we want to go on holiday or do something nice. As I anticipate money will be moved in and out of there frequently, I did not want to tie myself down to a limited access account, even though they have better interest rates. At the time, this seemed like the best of all worlds. We pay in £30 each per month, but obviously this is dependant on who is paying in and how much money you earn.

My Flex Regular Online Saver is one of my favourite savings accounts. I love this account. It is limited to paying in £250 per month however you receive 5% interest at the end of the year meaning you earn about £80 from doing nothing. The first year, you may not be able to afford £250 a month so just pay in as much as you can, the second year you have this account you start from scratch (your money gets paid into a low interest account as the Regular Saver closes) so you can pay in the same money into this account again. This may sound like a faff, but once you have set up your money transfers it is really easy. I make sure I pay all my £250 into my account on the 1st of the month so I receive the most interest (as interest is calculated daily). You are not restricted to taking money out, but you can only put a maximum of £250 in per month, so I would suggest that if you can leave your money in, do so. I save £3000 every year from transferring money from my current account, plus an extra £80 (approximately) from interest. Personally I put that £3000 into a different savings account when it is done, but you can just recirculate it to get your interest if that suits you.

Tax-Free Savings

I have three Tax-Free Savings accounts: Flexclusive ISA Issue 15, LTY Single Access ISA and a Help to Buy ISA. ISAs are tax-free savings accounts which have a (very big) limit before you have to start paying tax on your savings.

My Flexclusive ISA Issue 15 is an unrestricted account with an interest rate of 1.1%. I keep this as my generic savings account which I can dip into in case I need money (if I have not been able to work or I plan to do or buy something expensive). I rarely dip into my savings account, however if my current account gets really low I will transfer money across as obviously there is a better interest rate in my current account than this savings account. I only use money in here if I really need to as this makes up a lot of my house fund. I also transfer the money across from my Flex Regular Online Saver when that closes after a year. If necessary I will transfer money from this account into a higher interest savings account (such as my Help to Buy or Flex Regular Online Saver) if I am short.

My LTY (loyalty) Single Access ISA has an interest rate of 1.4% and as the title suggests, you can only take money out from it once a year. I have £4000 in this account and have just received £35 of interest added which is not great, but not bad at the same time (and this is probably as most of the money paid in was only paid in 3 months before the interest was added). I try not to put too much money into this account in case I need it. The plan for this account is just to slowly get topped up and then when I am ready to buy a house I take all the money out in one go. With this account, you can take out money more than once, but if you do the interest rate drops really low (so it is not worth it). This account is not very exciting, I do not regularly pay into it and the money just chills there and earns me money.

My Help to Buy is my other favourite savings account. It is part of the government scheme which means that when you are ready to take out the money and put it into a mortgage, the government will give you a bonus of up to £3000. The bonus is calculated by 25% of your savings (up to £12000) and you can also combine this with your partners Help to Buy also (so you could end up with £6000 which would pay off all your fees - hopefully). The only downside to this account is that the bonus is only valid on properties up to £250,000 (more in London) and it is now looking unlikely that my other half and I are likely to get the bonus as we will be buying above that figure. Either way, the account still earns 2.5% (which is not the best Help to Buy ISA FYI but I did not want to open a savings account with a different bank) which is really good. It is limited to £200 a month paid in (although the first payment in can be up to £1200, so put as much of that in as possible to give yourself a head start!), and I would never take money out of this account unless I really had to as I would not want to undo all my hard work. I have had my Help to Buy for over three years and I have paid into it religiously and I am still not at the government bonus maximum yet so get your foot in the door early and pay into this account. Last year I did earn £100 of interest on it which is a nice little bonus. It may not have the highest interest rate (although it is pretty good) but it can start to build your house fund so well, and you might as well try and get the bonus if possible. As house prices constantly go up, maybe the government will raise the bonus limit! Fingers crossed! The last thing to say about this is that the government could pull the scheme at any time, so you will keep your money and your interest earned but they could stop offering the bonus and they could stop people joining the scheme, so if you get in early you may find that you are in a better position than those who do not.

Credit Card

Finally my credit card. I chose Tesco Bank so I could earn Clubcard points which means I can save money when shopping or treat myself on their rewards (where you generally get 3x the monetary value on a voucher). I have no idea what the rate is on it as I always pay off my credit card bill when  I get it as it is on an automatic direct debit. The initial amount you can get is small at £250 a month, although if you want to use it more you can just pay it off when you have used all your credit limit and then restart. I would suggest starting off with a credit card like Tesco when you just turn 18 and using your credit card just for petrol (which is what I did), this means you are unlikely to go over your allowance and you know you have to pay for petrol, whether it comes out of your debit of credit card. After one year, you can increase your credit limit which is great as you can use your credit card to buy more essentials that you can afford. Do not spend what you do not have. If you can not afford it, do not buy it. I am good as I usually only buy essentials, but now will pay for holidays and such on it, but I always make sure I have the money in my debit card by the time the money is due out of my account as otherwise I may end up getting charged extra. Make sure as soon as you get the card, you call Tesco Bank and arrange for an automatic direct debit to come out of your account so you do not forget to pay it which would then cost you. The only issue I have ever had is every so often I go over my limit, the first time they wiped the fee for me. The second time they did not but I have since increased my credit limit so I do not end up paying an unnecessary £12 again.  The great thing with the Tesco card is earning Clubcard points which are a good way of getting more for what you are spending. You can collect the points on your credit card without having to actually pay on your credit card too, although you usually get bonus points if you do. Finally, a credit card is a great way of racking up a good credit rating, so long as you take my advice and always pay it off!

Conclusion

I hope this has been of interest to those wondering about how to start off saving money. All banks and building societies do offer savings accounts of different types, but I did choose Nationwide Building Society as it had the best rates for me. My next post will be looking at other banks and building societies to see where the best rates are! Please do check out my other posts in the series and do not forget to subscribe and follow my instagram for updates and other posts! Thank you for reading.

The House Diaries Series
Understand Your Position
Optimise Your Savings Part 1

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