As a thrifty gal who runs a blog on saving money in all walks of life, you can imagine how interested I am in financial affairs. Okay, perhaps not as interested as you might think but I DO still take an interest in my own money, my savings and the property I hope to investing in. After watching every penny and saving for years to scrape together a decent amount of savings, I’m very keen to learn more. While my 9am Monday morning financial accounting module in the first year of uni was a nightmare (ironically it was my best grade that year!), learning how to manage money and set up budgets in real life was almost fun. Even though at the time I couldn’t imagine why I’d ever need to know how to do a Balance Sheet, it turns out that I DID need that accounting module more than it needed me. I’ve done my own accounts and tax returns throughout all the years I’ve been self-employed and I’ve probably saved a lot of money in accountant’s fees by doing so! While it might seem dull, it’s a great idea to at least look at your bank account every once in a while. Business guru Marie Forleo says that checking in on your accounts daily is a sure-fire way to keep on top of your finances and stop any issues before they turn into money problems. These days I can probably tell you about every single pound that enters and leaves my account. Geeky, right?! The fallout from the Brexit vote last week has already been intense, and looks set to continue for a very long time to come. Already we’ve seen the pound fall off a cliff (although, because I’m sometimes paid in dollars for my US writing, I am actually earning a little extra now – silver lining etc), the economy is in turmoil, and it’s left many of us concerned about where this leaves our families, and what the future holds for us. Everywhere you look there is talk about values of pensions being wiped out, and real people losing real money.So how safe is our money?
The important thing to note is that for those of us with savings, nothing has changed. That’s because everyone in the UK is protected by the Financial Services Compensation Scheme, which covers every individual for up to £75,000 per institution they have savings with. Banks and building societies have also been regulated far more tightly since the last recession, meaning they are obliged to keep higher levels of reserves to avoid crises like Northern Rock from 2007. The bottom line is that, if you have savings, you don’t really have much to worry about.
In fact, savings and current accounts may well become even more appealing in the months and years to come. It may sound paradoxical, given that the interest rates offered by banks have been utterly derisory for a number of years now, and probably won’t get any better in the near future. But certainly for those families with any extra savings to set aside, you’d imagine many will be giving something as volatile as the stock market a wide berth.
What’s the best way to go?
Putting money into Cash ISAs has been very popular with Brits over the years, given that they are easy to use and offer a significant tax benefit. But as the returns on ISAs have also plummeted, these have become less of a feature among their savings plans. The other factor is that with the introduction of the Personal Savings Allowance, the tax benefit of an ISA has become null and void.
There are other types of ISA which have become quite appealing though. The Help-to-Buy ISA is great for those who aren’t yet on the property ladder. For every £4 saved into this type of account, Government tops you up with a £1 (ie: 25 per cent); to a maximum bonus each month of £50. This bonus is only received retrospectively when you look to actually purchase your home, but, suffice it to say, a bonus of up to £3,000 over five years can come in very handy for the diligent saver. I opened a Help-To-Buy ISA as soon as they were launched and have saved the maximum amount possible so far, so I feel like my money is already growing.Similarly, the new Lifetime ISA will bring about a bonus structure like this. It is only available from next April, but for those between the ages of 18-50, saving into this account will also yield a bonus of 25 per cent – up to a maximum of £1,000 each year (ie: if £4,000 is saved). It acts as an alternative to a pension, in that you can start withdrawing from this account without charge once you turn 60, or beforehand if it’s for the purpose of buying a first-time home (or to fund treatment of a terminal illness). I’ll definitely be opening one of these Lifetime ISAs when they are launched next year.
Another option is peer-to-peer lending, which involves lending your extra money directly to vetted borrowers via an online platform. It also has the tax benefit of being covered by the Personal Savings Allowance, and now has its own type of ISA too. The big risk of course is if the borrower doesn’t pay you back, but platforms normally have safeguards against this, and returns of up to 6 per cent are attractive.Thinking things through
These are very uncertain times to be living in this country and, especially if you’re raising a family, it can be daunting. But rather than getting caught up in the hysteria, the best thing we can do is keep our heads down, put serious consideration into how best to safeguard our household’s financial security, and take the necessary steps from there. Where there is doom and gloom, there is also opportunity, and we Brits are a resilient bunch! Keeping a cool head, and taking care of things at home can really help to ensure that we come out on top.