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Investing whilst in univeristy

Investing whilst in college is tough, you may need to be able to access in the near future but yet want to have a decent interest rate. Plus whilst your in college you want to avoid high risk investments as although you make more, you can also loose more. Furthermore, its unusual to have a large lump sum but rather to want to put away money incrementally. Todays post will share with your some options to make the most of your money.

High interest current accounts.
Only two UK banks give interest on their student current accounts (Santander and HSBC). However, Santander only give interest up to £2k and HSBC £1K  but only in your first year of banking. Therefore, it is generally best not to keep your investable money in these accounts. These accounts are sold on the overdraft (which is best not to set up or be touched) and really are not worth much other than the free rail card or student discount card. 

There are, however, a number of banks who offer high interest current accounts (some even as high as 5%). If you are looking for a low risk investment and don't have a huge amount to invest then this could be a great option for you (amount vary per bank but limits for high interest will often be in the range of £2000-£5000).

Premium Bonds. 
Are a low risk alternative where you can save up to £50,000 tax free and 100% backed by the government. Sounds great, well here the catch you essentially gamble with your interest rate. Each month you are put in to win prizes you could win a £1,000,000 or nothing. You need to have roughly between £20,000-£25,000 as a minimum to win every month (of course that brings no certainty but statistically speaking).

Individual Savings Accounts.
ISAs fall into two main categories; cash and Stocks & Shares. You can invest up to £15,240 this tax year (16/17)

  • Cash ISAs- With interests rates pretty abysmal and the new tax rules allowing basic rate tax earners to earn up to £1000 in interest on a savings account without paying tax the advantages of a cash ISA are quite low at the moment. 
    • Help to buy ISAs are a great option and count as a cash ISA. Pay in up to £200 a month and the government will give you a 25% bonus when you use the money to buy you first home up to a balance of £12,000. They also have reasonable interest rates going as well so even if you don't end up using the money on a house it can be a great option.
  • Stocks and Shares ISAs allow you to hold stocks and shares in a tax free wrapper rather than being liable to Capital Gains tax when you sell them. You can manage your own portfolio or select pre-made ones by providers. We use ours to hold investment "mutual" funds tax free.

This may sound a bit strange but you can start contributing to your pension once you turn 18 (and your parents can contribute to your pension before you are 18). If you are not working you can contribute up to £3,600 (gross) per year. The government gives 25% tax relief on all net contributions, meaning you get a 25% bonus each time you pay into your pension. Making contributions young allows the power of compound interest to work and can make a huge impact on your pension in the future.

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