5

Here's the long put short:

I'll have £100,000 in my possession soon (inherited). I'm 17 so I have a NatWest Adapt account (teenager bank account) with an interest of 1.09%.

Now, if I was to put the £100,000 into that account, would I earn £1k+/month interest?

There is no limit to what I can put in there, that's the only thing I know :S

So is there any kinda catch with this? I mean, getting paid £1k+/month for sitting on my backside....

Thank you.

  • 9
    Isn't 1.09% a yearly rate? That makes it £1k+/year interest... – littleadv Sep 20 '11 at 21:43
  • Thats so crap. I though it was monthly.... So I actually get 0.09% each month, which is terrible. I wasn't thinking of investing it, but that may be the only option. Anyway, thanks for the input guys. – user4768 Sep 21 '11 at 9:58
  • 2
    You can find 1-year fixed-rate bonds in the U.K. yielding around ~3.45% per year ight now. Check out moneysupermarket.com/savings/fixed-rate-bonds .. but before you invest anything, get some proper advice from a trusted source, not from a fund salesperson or broker. Plenty of people will tell you they know the best way to invest your money for you, but are simply after commissions or other fees (or worse, to scam you outright.) – Chris W. Rea Sep 21 '11 at 13:30
  • Hey Chris, I think they're all for people who are over 18 though :( – user4768 Sep 21 '11 at 14:01
  • You may be able to invest with an in-trust account established by your legal guardian(s). – Chris W. Rea Sep 21 '11 at 14:51
7

The 1.09% is per year, not per month. Not too bad for a regular savings, but it's just interest rates in general that are bad right now. The inflation rate should be 3.8% currently so if you hide your money in a bank you'll end up with a loss of 2% in buying power in a year... If you open an CD (Certificate of Deposit), the best APY would be around 2.2% for a 5 years one and you will still get hit by the inflation.

You might want to invest those money somewhere else and in some other ways. The stock market might give you excellent entry points soon (if not right now) but since you're very young and inexperienced I strongly recommend to do tons of research and ask for advice from experienced people before you jump into these kind of things by yourself.

  • 2
    Actually, in the U.K., where the OP is located, inflation is running even higher than in the U.S.: 4.5% for August 2011 (year over year). See bbc.co.uk/news/business-14895510 .. so your point is even more valid, even though you quoted U.S. figures for a U.K. question ;-) – Chris W. Rea Sep 21 '11 at 13:23
  • My bad, I guess I read 'united' and assumed 'states'... – Marsellus Wallace Sep 21 '11 at 14:18
  • yeah quit interest do the trade – user7969 Jan 6 '13 at 17:16
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Tax won't be an issue. You have a personal tax free allowance of £7475 this coming year, so your first £7475 will be tax free. 1.09% is pretty abysmal (sorry - but we've wrecked the economy for you young fullas), so you'll only earn about £84 a month. Not as awesome as you were expecting I think.

Would recommend getting advice on other means of generating an income with your 100k. Because if you bought a cheap flat (cheap enough to own without a mortgage), you could probably earn between £300-£400 a month fairly comfortably. (I'm not suggesting you become a landlord, just that interest rates currently suck)

  • Thinking about it, if you put your money away for 12 months, you'd get a much better interest rate. Closer to 3% if you shop around. That's an extra couple of grand there... – davewasthere Sep 20 '11 at 22:19
  • 3% a year? Where??? – Marsellus Wallace Sep 21 '11 at 2:58
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    This is a guy who is 13-18 years old. Owning a flat is probably not a good choice. – DJClayworth Sep 21 '11 at 13:17
  • money.co.uk/savings-accounts.htm show a few interest rates at around the 3% mark. And term deposits of 12 months are available at that interest rate too. – davewasthere Sep 30 '11 at 10:24
4

The 1.09% is per year, not per month, so you will be getting about 1K per year just for sitting around on your backside.

Some important things. It is almost certain that you can earn a better interest rate elsewhere, if you are prepared to leave your 100K untouched. For example, even in Natwest you can earn 3.2% over the next year if you buy a fixed rate bond. For 100K that is certainly worth looking at. Or maybe put 90K in a fixed rate bond and leave 10K in an instant access account.

Taxes should not be a problem since you can earn around 7K before you start paying taxes. However be aware that in the UK most bank accounts deduct tax at source. That means they send the tax they think you should have paid to the government, and you then have to claim it back from them. Accounts for young people may work differently. Ask your bank.

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