Archive for August, 2012
No Time Like the Present (For Saving and Investing)
I’ve never been a great saver, let alone an investor. But in the short time I have been working at Scottish Friendly, I’ve come to realise that investing financially in my future is something that I really should be moving to the top of my priority list.
I remember when I got my first real job. I was full of good intentions when it came to starting a pension plan. I was living in Glasgow at the time, but working in Edinburgh and had got hold of some glossy sales literature from a number of pension providers.
It’s a long time ago now (last century no less), but I can remember brochures from Scottish Widows (they had a nice lady in the advert and had Scottish in their name – so they must have been good!) and The Prudential (prudence – good word association). I packed the brochures into my bag with the intention of poring over them on the long bus journeys that blighted my working weeks back then.
Needless to say I lasted until about Haymarket on the bus back to Glasgow that night before I stuffed the glossy brochures back in my bag and stuck some tunes on my old portable CD player. (This was in the days before iPods and MP3s, kids.) I seem to remember a favourite song of mine at the time being ‘The Sunscreen Song’ by Baz Luhrmann, but I digress.
There was just too much to take in. All the figures and options, it was just confusing. My problem was, I was fully intent on getting the best possible deal available from the most reputable provider on the market. However, I didn’t have the willpower or the inclination to go over all the facts and figures. This was of course, in the days before internet advice forums such as Money Saving Expert.
But little did I know that by delaying my decision, I was actually making any deal I would eventually settle on worse by the day.
And so the glossy pension brochures became destined to reside at the bottom of a drawer for many years, never to see the light of day again. I continued on with my working life, happily enough, but always with that gnawing thought at the back of my mind telling me that I really should have a pension in place.
That’s the way it remained for a good number of years until I started a new job back in Glasgow. The great thing about this job was that not long after I started, there was a staff meeting about an option to take out a stakeholder pension.
I immediately took the option to invest. It was pretty easy. I just signed on the dotted line when the man from the bank came in to tell everyone about the pension. It was ideal for me. I didn’t have to think about it too much, and I was pretty sure that it was a reasonable deal. The fact that a good number of my then colleagues also took out the same plan reassured me too. Safety in numbers, I thought.
I do however remember asking the pensions man if there was any way that I could lose my money. He smirked and said that every bank in the UK would have to go out of business for me to forfeit my investment. We both laughed and rolled our eyes. There was no way that was going to happen! (I should add – this was 2004).
Anyway, I did start putting some money away every month. Not as much as I should have, but it was something – and today it has actually amounted to a not inconsiderable sum. And I am so glad that I signed on the dotted line that day.
Apart from a Cash ISA (which I have since plundered), my stakeholder pension had been my sole foray into the world of long-term savings and investments.
Until now.
To get back to my original point – it’s from actually working at Scottish Friendly and familiarising myself with the company and products that I have come to realise the main points that have spurred me on to properly invest in my future.
1. In my opinion, Scottish Friendly are an extremely reputable company. Of course, working in the office with such fantastic colleagues reassures me of this point. But I only have to take a look on the web at stories such as these to press home this point:
http://www.bbc.co.uk/news/uk-scotland-scotland-business-17829863
http://www.bq-magazine.co.uk/success-story/scot/sc8-ss1/
And.
2. The best possible thing to do when saving or investing is to act sooner rather than later. Because each day I take procrastinating and being indecisive means less reward in the long run.
So. I put away an amount that I am comfortable with every month, hoping to reap the benefits ten or fifteen years down the line. The way I look at it is, if I don’t put the money away, I’ll only spend it anyway and I’m probably not going to miss it.
The fact that it’s also a separate plan, out-with my regular bank makes it much less likely that I will try and dip into it in the future. (Online banking is great – but it can be far too easy to access savings).
That’s why I have so far taken out not one, but two plans in my short time working at Scottish Friendly – one for my young son and one for me. And I fully intend to take out more investments for my family and myself. Not to mention increasing my stakeholder pension payments.
It might even be fun taking out different plans and seeing which one gives me the best return on my investment. Ah how times have changed.
I would finally like to point out that these are my own personal viewpoints gained from my own meandering experience and they in no way constitute ‘advice’. As Baz Luhrmann put it – “Advice is a form of nostalgia, dispensing it is a way of fishing the past from the disposal, wiping it off, painting over the ugly parts and recycling it for more than it’s worth. But trust me on the sunscreen.”
No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.
When to save and invest?
As Bradley Wiggins heroically showed last month with his historic Tour De France victory: timing is everything. David Cameron also recently predicted that macro-economic volatilities would continue for some time. So the Scottish Friendly blog drew inspiration from the Yellow Jersey winner and put our investment hats on to tackle similar questions to those Wiggins must have asked himself as he climbed mountains, out-manoeuvred the peloton, and gradually built a winning margin with well-timed drives. When do I invest? How much can I push to get to the end goal, and how long do I need to do it for?
This week, the picture of the UK economy looked gloomier than it has done for some time. The ONS reported that the UK recession has deepened with the output of the economy falling by 0.7% between April and June [1]. The contraction was much bigger than experts expected and follows a 0.3% drop in the first three months of the year [2]. Ernst & Young ITEM Club’s report also showed consumer credit conditions have worsened for people [3], and when you consider these headlines, it can feel as if financial mountains need to be climbed. When it comes to saving and investing though, it is still possible, and a small change in behaviour, often involving a bit of small change from your pocket, can make all the difference.
If you take saving or investing towards a deposit for a house for example, getting into a habit of putting small sums aside and starting early could be an effective strategy. In terms of timing, as with the Tour De France, you can’t get to your goal in one day, it takes a long term approach. Here’s what I think you can gather from this approach for saving and investing effectively:
Work out how much you can save or invest – Saving or investing for a deposit can seem like a big task, but it may not be as difficult as it might seem at first. Successful savers and investors get into a habit and it can be as simple as not buying a cup of coffee or indulging in a magazine each week. There are savings and investment plans out there that can fit to your lifestyle and offer you the flexibility to contribute more or less each month by direct debit. If you think really hard about it, a small amount each week could be a very realistic goal, but that habitual amount over 10 years could help towards getting on the property ladder, so a little discipline could go a long way.
Establish clear goals – Think about your priorities and make a list of long-term goals. Work out if it is 3, 5 or 10 years in the future and think what you would like to be doing, whether it be setting aside money towards a holiday to Cancun, university fees, a new car or a housing deposit, map it out and stick to the task.
Shop around – There is a wealth of information on the web about different savings and investment products. Money supermarket, Which? and Compare the Market are good places to start looking. Before you commit, make sure you have looked at a range of products and found the right one for your lifestyle.
Keep in mind flexibility and tax efficiency – Think about how you want to save or invest and weigh up the options available. You may want to lock money away, and there are tax efficiencies available for doing so, or you might prefer to have the reassurance of knowing that you have access to the money if you need it. Many people are not aware of friendly society tax-exempt Savings Plans (TESPs). These long term investment plans, under current tax law, grow free of income and capital gains tax (other than tax on dividends from UK shares). Typically, you need to invest for at least 10 years to ensure that your plan is tax-free. However, please bear in mind that tax treatment depends on your individual circumstances and tax law may change in future. There are plans that allow you to take the money out earlier if you need to but if you do, you may have to pay tax on the profits you make.
Keep an eye on your progress – It is important that you keep up to speed with how your money is performing. This is perhaps the easiest thing to do, but the thing people often forget. So when those statements come through your door, don’t just stuff them in a drawer. Take a while to properly read over them and see how your investment is growing and if you need to consider other options to meet your financial goals. Consider how much you will have at the end of the plan and if it meets with your expectations. You may also get a good feeling from saving or investing and feel a sense of achievement.
Read the small print and ask questions – Warren Buffet, arguably the greatest investor globally, always stuck to the mantra: “Never invest in a business you cannot understand.” Keeping this pragmatic advice in mind, you should make sure you check the small print for information on fees and that the savings or investment plan literature is clear and easy to understand. If you are interested in a plan, and you are still not 100% sure, you should consider picking up the phone or emailing in questions. Good financial services providers will be able to answer your question quickly and with clarity but cannot provide financial advice. If you are in any doubt as to whether a plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.
In conclusion, as Chris Hoy, Bradley Wiggins and Mark Cavendish strive for their goals on the global stage, we can learn a lot from their preparation and approaches to building a lead when it comes to saving and investing. Keep it regular and keep an eye on the goal and saving and investing becomes much easier.
For more information, why not take a look at the Why Save? section of the Scottish Friendly website.
References
[2] The ONS – http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product–preliminary-estimate/q2-2012/index.html
[3] Ernst & Young – http://www.ey.com/UK/en/Issues/Business-environment/Financial-markets-and-economy/ITEM—Forecast-headlines-and-projections
Scottish Friendly’s 10 things to do for kids on a rainy day!
So the summer of 2012 is proving to be one of the wettest on record, but here at Scottish Friendly in Glasgow we are used to investing for a rainy day. However, when it comes to school holidays, and the downpour doesn’t stop, it is handy to have a few options up your sleeve to make a rainy day a memorable one.
We decided to help parents by providing ten ideas for a rainy day for kids which don’t eat into your savings and investments.
- Create a fort – Forts can be made out of anything around the house and can be so simple to create. The great thing about forts is that they cost almost nothing, you can use an old cardboard box and they can provide adventures and creative play for adults and kids alike. Once the fort is built; it can double as a cinema, a book club or even a home for teddy bears.
- Revel in the rain – Don’t fight it, enjoy it. Wrap up well in waterproofs and go for a brisk walk. Introduce the children to the appeal of splashing through puddles en route to the nearest family-friendly pub for chips and ice cream. Or step outside and stage a water-fight, with the aim of getting as wet as humanly possible.
- Museum peace – The word museum can all too easily sound like a tolling knell of boredom, but not anymore. Today’s museums are brilliant places to go with children. For example, there are an irresistible number of things for kids to do in the UK. Just visit www.museums.co.uk
- Make a Movie – Most households have camcorders. Keep it charged up and get ready to roll up your sleeves and release the inner Spielberg! Let your kids create a story to be made into a movie. Have them collect props, costumes and whatever else they need. Do a few dress rehearsals before the “taping”. This rainy day activity will turn into a cherished memory IN years to come.
- Read stories – Children get so much out of good story telling, whether it is a Julia Donaldson tale or a Cressida Cowell, young minds get far more out of a good story session than a film. Arm yourself with a range of voices and away you go. If you need more information on the right type of books for a particular age range, visit the Scottish Book Trust, they have a mountain of knowledge that will see your family entertained for hours. It has also been proven that children who are regularly read to perform better in the classroom and it can be great for family bonding. www.scottishbooktrust.com/
- Stay at home Olympics – the games are underway as are school holidays. It will inspire a generation of young people into sport. But what if you are waiting for Andy Murray to take to the court or Usain Bolt to get set for a sprint? Simply create your own Olympics in the comfort of your own home. Turn speed Scrabble into a competition where you can test your quick thinking and problem solving abilities together. Perhaps tiddly winks is more your thing? A Lego build competition will have children over the moon. Create a scorecard and prizes for every participant.
- Play at dressing up – Often the things people enjoy most in life are the most simple. Dressing up isn’t complicated, but it can make a rainy day bright with colour. If you have a little fashion wannabe, turn the living room into a mock catwalk and play some fun music to get the full effect. You can also encourage children to make their own outfits! www.bbc.co.uk/cbbc/thingstodo
- Paint and draw on request – This is so easy to do, but often parents get put off by the mess it can involve. We suggest laying down old newspapers on the floor and table and accepting that kids are messy when they paint. Get involved too by asking your children what they would like you to paint, and once everything has dried, pin the pictures up on the fridge, but if they are really good, mount them on the mantel piece and enjoy your very own family masterpiece for years to come.
- Bake a cake – Baking with kids is a great way to bond and have some quality time together. Kids are naturally inventive, drawn to sugar, and will soon want to be trying something a bit more challenging, so let the kids get on with the fun part – like decorating, trying new toppings, and having a great time!
- Go swimming – Sometimes, if it has been raining for ages, the best option might be to get truly wet. Swimming is a great form of exercise and is cheap to do. For something different – take your kids to an outdoor pool. You can find out more about these from your local council website, but here is a link to the ten best in Britain: www.telegraph.co.uk/news/uknews/3089265/Britains-top-10-lidos.html
We hope you and your family have a great time trying these activities out if the rain persists. We certainly did!
Scottish Friendly’s 10 Things to Do For Kids on a Rainy Day!