endowment policy Vs savings account

[bednobs]

Hi, my NY resolution is to start saving for a fab holiday (it will be about 10 years time). Realistically to get the money i want i'll need to save about £100 a month which seems doable to me. I meant to do it when i was 30, so i could ahve the holiday when i was 40, then i meant to start when i was 35 so i could have it when i was 45 (you get the picture)
Anyway, in my younger days i would have taken out an endowment policy over 10 years, but i'm wondering if it might be better to just put the money in a savings account. My other option is that i have an offset mortgage with a savings pot, and if i put it in there i could reduce the interest on my mortgage, althought as i am only paying .99% at the moment it's not going to make all that much difference.
What do you think the best way of saving up this amount is?

[thebarron]

If you are going to save for ten years try an investment trust

[bednobs]

what is that - never heard of it. How do they work?

[boxtops]

I would put it in an ISA, you can can save tax free up to £3600 cash p.a.
Endowments have fallen down recently since the cash is invested and the returns have sometimes not been as large as predicted. Your mortgage rate is brilliant, I wouldn't mess with that if I were you!

[bednobs]

yes, we are lucky with our mortgage - it's a tracker that tracks .5% oer BoE baserate

[boxtops]

I'm on a straight repayment but (fingers crossed) only two years to go..... I do like the ISA option for savings, although the interest rate is not great, the tax-free element makes up for it, and if you have a cash ISA you can get at the money easily IF you should need it.

[society]

Basically an Investment trust is one in which the banker or trustee invests your money in stocks trading at a discount.

Personally I save my £100. per month, and knowing that my money is well safe.

[society]

I'd ^^^

[bednobs]

i want it to be safe, but i'm unsure on whether i really want accesibility or not - too tempting perhaps

[thebarron]

If you want your money to be safe try a cash isa

[KARL]

Any risk free savings arrangement currently provides rather pathetic returns, cash ISAs probably being the best option. However, you might want to consider some form of guaranteed return investment ISA (often called FTSE tracker or something similar) whereby you are guaranteed some minimum (not stellar) growth but have a chance of gaining quite a bit more if the investment market strengthens. The only risk is if growth rates remain flat in which case you will not get as good as the best interest available. However, over a period of 10 years, your chances are (historically) not bad. The only point being that usually these things are lump sum concepts, not steady contribution ones. If going for conventional savings (ISA or not) make sure you keep an eye on market developments and be ready to switch rather than sitting with a vehicle that has fallen behind in performance. If you are prepared to take a bit of risk (I would, based on a 10 year span) then consider an investment ISA (for example FTSE based) - this is a time when it is not unreasonable to hope for a recovery within the next few years, but do not rely on steady growth - set yourself a benchmark and withdraw funds once that growth is reached. For example, you could pull out all money gained once you have a 25% gain (or any other level you choose) - put it in the best available conventional savings, and repeat if growth continues.

[Captain Spod]

Some banks offer a really high interest rate (6-ish%) on a regular savings plan over a fixed term. It may only be a year, but it's no risk and although the contributions are limited, they are more that the £100 you're considering. BTW, Boxtops is a bit out of date, you can now put £5,100 per year into a cash ISA.

[Whoever]

I'd keep your holiday money separate from your mortgage. Consider taking out a Regular Monthly Saver at the best interest rate you can find. (Check out moneysavingexpert.com or a similar financial website to find the best rates). Once it's matured at the end of 12 months, stick it into a Cash ISA as your current annual tax free allowance is £5100, increasing slightly in April. Then take out another Regular Saver for 12 at the best interest rate you can find, and repeat the process. This way, every year you'll be increasing your tax free savings until you've build up a reasonable sum. Remember that every tax year you can take out a new Cash ISA, which doesn't have to be with the same provider every year. Some are instant ISAs; others can be for a fixed term lie 2, 3 or 4 years with slightly higher interest rates. Just be sure you don't take out a long term ISA if you might need some of the money for emergencies and don't have other savings you can draw on.