Finance expert Fergus Muirhead offers savings advice to BBC Scotland viewers
I'm Fergus Muirhead and I'm trying to answer any money or consumer problems you may be facing at the moment.
You can contact me by e-mail at firstname.lastname@example.org
I will deal with a selection of your e-mails every second Monday on lunchtime Reporting Scotland, Scotland Live and on the BBC Scotland news website.
Q. I would like to ask your advice on what to do with our savings. We currently have about £35,000 in savings which is in an ING account, which is governed/guaranteed by the Dutch government for up to about 100,000 euro. This account does not pay that much interest and we believe that this rate will only decrease over the next year, and we have no idea how that bank will fare in the next year. Can you please give any opinion of the stability of this bank and any ideas with how we can best save this money in a safe place for our future? Stephan Wegner
A. There is a sense in which the 'stability' of the bank is not an issue since your savings are guaranteed by the Dutch government up to 100,000 euros. The more important question might be about the stability of the Dutch Government. The definition of 'safe' is an interesting one in these troubled times. As you rightly say most deposit accounts are reducing their rates of interest and many are now paying rates that are lower than the rate of inflation, so in effect you are losing money in real terms. This is likely to continue as long as interest rates remain so low. Having said that the difference between the highest interest paying account and the lowest is fairly big now and it does pay to shop around a bit looking for the best rate.
Q. About six months ago I took out a Stocks & Shares Isa with HBOS. By nature I'm medium cautious with my money; for this reason I pay in £150 per month to this Isa; rather than the full £300. With the current climate your advice would be much appreciated on whether I should continue paying into this Isa or not? Chris Chalmers
A. There are really two questions here. Firstly should you carry on paying into an equity Isa and if so is the HBOS Isa the best one for you? There are two types of Isa - the first is a Cash Isa and notwithstanding my previous point about inflation, you should find that the value of your Cash Isa will not go down - £1,000 invested today should be worth at least £1,000 next year. This is not true of an equity Isa. The value of this type of Isa will rise or fall depending on the value of the underlying investments.
As for the second question, there are literally thousands of equity Isas on the market and the performance of each will be different depending on the quality of the manager and type of investments he or she is using. The charges involved with each one will vary as well so if you are investor in a poor performing fund with high charges you will suffer even more in a falling market.
Q. I am a 22 year old male and still live with my parents. However, I am currently working away from home and am earning a good wage as a result of my expenses, etc. I recently opened an easy access savings account with RBS, into which I intend depositing between £200 to £300 per month. I am now wondering if this is the best way for me to save for the future. Paul Smith
A. This is a good question and the answer partly depends on why you want to save in the first place. I presume that when you say you put the money in an 'easy access' account it is because you are likely to need the money at short notice, for day-to-day living, or as an 'emergency fund'? If this is the case then this type of account is probably best for you, and you just need to check whether there are other accounts of the same type that are paying a better rate of interest and if so you should use them rather than the one you are currently using.
You do have to remember, however, that as well as saving for short term, day-to-day expenses, you also have to consider saving in the medium term, say for a deposit for a house at some point, and in the long term for retirement so you may not want to put all of your eggs in the one basket.
It may also be that you are prepared to take a bit more risk with your longer term savings and look at a deposit account that ties your money up for six months or a year, or perhaps even look at investing some of your money into stocks and shares.
Remember also that you have to think about tax so it may well be that an Isa or pension will be good for you in the longer term since both are tax efficient investments.
Q. I wanted to buy an Isa for £3,600 and I am unsure as to whether to put it into a Cash Isa or an Investment Isa. Can you give me some advice as to which would be best? Obviously an Investment ISA pays more interest but are they absolutely safe at the moment? Kathryn Findlater
A. I'm glad someone has asked this question about the basics of Isas. Firstly can I correct what you say? You make the comment that 'an investment Isa pays more interest' than a cash Isa but that is not necessarily true. Investment Isas, or Equity Isas as they are also known, are invested in the Stock Market, so in good times they are likely to return more than you will gain from a Cash Isa. But in the bad times, such as we are seeing at the moment, they are likely to lose you a lot of money. There are no guarantees at all with equity Isas. The return you receive is dependent on the return that the fund manager investing your money makes. In reality the Equity Isa is not paying you a rate of interest at all, but a return on the investment you make, be it into a single share or into a fund that is a mix of a lot of shares.
With a Cash Isa you will not lose money, but in today's market the return you receive may not be great. So the answer to your question about which is better for you is dependent on how much risk you want to take and how long you want to tie your money up for?
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.
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