3 Account Combo - June 2018
I am deciding to switch up the 3 Account Combo slightly and look at it in a different way. Picking the best account for your savings is important. But it's not the only avenue you should be focusing on. Taking control of your personal finances is about saving, spending and investing in the right way. So I'm going to take that knowledge into account and apply it to this post from now on. The aim of this is to keep things simple. There are dozens of accounts out there and I'm going to focus on my top picks for each category.
Nationwide FlexDirect Current Account
This is unchanged from last month and this is because I think it's too good not to have. This is especially true if you can take advantage of 'Recommend a Friend'. You get 5% interest (AER) for up to 12 months on any balance up to £2500. The only catch is the £1000 minimum monthly pay-in to get the interest. Here's how I made it work. I kept a balance of £2500 in the account and I set up an automatic transfer of £1000 in on the 1st of the month. I set up a 2nd automatic transfer of £1000 which would take place a few days later. This time moving the money in the opposite direction. The £1000 would go in, then go out. The balance on the account would stay at or above £2500 which means the interest was maximised. £2500 at 5% AER is equal to £125 in annual interest.
5% AER on £2500, for 12 months
Min pay in £1000 each month
No direct debits required
Recommend a Friend
After opening the account, if you recommend a friend and they switch their current account including 2 direct debits, you will both receive £100. You can refer up to 5 friends (£500) per tax year. Also as a bonus, their mobile app is really good. Some banking apps are outdated but this one worked flawlessly for me.
American Express Preferred Rewards Gold
This credit card normally has an annual fee of £140 but the fee is waived in the first year. The sign up bonus on credit cards is usually very generous (designed to entice you to use their service). The sign up bonus on this card is 20,000 American Express Membership Rewards (MR) points. You must spend £2000 on the card in your 1st three months of card membership. If you don't think you can hit this with your normal spend one tip is to ask close family/friends (anyone you trust to pay you back immediately) to put their purchases on your card. Never plan on overspending to hit the minimum.
MR points can be converted in multiple ways. Either to other rewards schemes (eg. Avios), statement credit to pay off some of the purchases you made on the card or gift vouchers. Converting to airline miles/hotel point schemes offers the best value (pounds per point).
20,000 point sign up bonus
2 lounge visits per year
min. of 1 point per £ spent
refer a friend
You receive 2 complimentary airport lounge visits per year of card membership. This applies to any airport in the Lounge Club network. You receive bonus MR points for every pound you spend using the card. 1 p/£ (points per pound) for any purchase, 2 p/£ for any airline/foreign currency spend, 3p/£ on Amex travel. You get a 10,000 MR point bonus if you spend £15,000 within each 12 month period of your card anniversary. If you refer a friend and they are approved, you will receive 9,000 MR bonus points (up to 90,000 per year).
I do not personally think that a £140 annual fee after year one is justified. Of course this will depend on a number of factors. Are you going to take advantage of the 2 complimentary lounge visits per year? Can you take advantage of the MR point bonuses and the refer a friend scheme? I would only continue to use the card past the first 12 months if I obtained more than £140 in value from the card each year.
Vanguard Stocks and Shares ISA
This tax free investment account allows you to invest in Vanguard funds. You can contribute to one stocks and shares ISA per tax year and the current tax year allowance is £20,000. You don't pay income tax or capital gains tax (CGT) with any investments held in a stocks and shares ISA. This account will only be of benefit to you if you are happy to invest in Vanguard Funds, of which there are currently 72: 33 Equity funds comprising of both actively and passively managed index funds/ETFs across global markets; 22 Fixed Income funds (bonds); and 17 blended funds. The blended funds include Life Strategy funds where you pick the category best matching your risk tolerance from cautious to aggressive. Cautious funds are tilted more in favour of lower risk bonds and aggressive funds are tilted towards equity.
Vanguard is famous for low cost passive investments which track the market (index funds). Whilst some mutual fund managers charge an annual fee of more than 1 or 2% of your portfolio value per year, Vanguard has an ongoing management fee of 0.15% + the ongoing fund charge of any fund you select. As an example, the Vanguard U.S. Equity Index Fund charges 0.10% per year (on top of the 0.15% management fee. So you would pay 0.25% of your portfolio value per year that you hold that fund in your ISA.
0.15% Annual Account Fee
From £500 lump sum or £100p/m
Choice of 72 Funds
Great Online Interface
Withdraw When Required
Invest Up to £20,000 in 2018/19
If having a good online interface is important to you (it is for me), then Vanguard's won't disappoint. Their insight section provides further detail on your investments. You can view a breakdown of your portfolio by geographical region, company, sector etc. Most investment platforms do offer this information but Vanguard makes it really easy to find and understand.
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