Posts Tagged ‘Savings’
10 ways to teach your children to be money-wise
Recently an independent commission found that thousands of students are being put off applying to university by a rise in tuition fees. The first report revealed that applicant numbers to English universities are down 8.8% compared with two years ago – around 37,000 fewer students[1].
When you look across the rest of the UK, the conditions facing young people are worrying. A poor graduate job market, higher debt levels and inflation means that careful management of personal finances is key for the next generation. With GCSE and A level results dropping through letter-boxes throughout England last month, university and further education costs are a hot topic. Official figures released in August by the Independent Commission on Fees show that English higher education establishments will now be able to charge students up to £9,000 per year[1] – which could add up to a maximum of £27,000 for a three year degree course. Many young people will be asking themselves: “Can I afford higher education?”
At Scottish Friendly we believe in thinking long term when it comes to navigating a tough financial climate. So in this blog we have split our guide into four key chapters in life with some helpful tips for teaching children of all ages important money skills that will help them get a good start in life. Like any good habit, once you teach your children to establish a positive pattern, saving and managing money well should hopefully become second nature to them and can make a big difference to their adult life.
Throughout their childhood it is also important to remember you can save or invest on their behalf. Help ensure your child gets off to a good start in life by investing from £15 to £25 per month and using their tax-free savings allowance for a maximum of 18 years. Look out for products such as the Child Flexible Plan. You can make tax-free investments for a child aged under 16 to give them something to build on when they start adult life (remember tax treatment depends on their individual circumstances and tax law may change in future).
2-5 years old
- Imaginary play – Children revel in make believe and the simplest play can be turned into a basic lesson on how money works. Empty your penny jar and turn a cardboard box into a shop or ice cream parlour by cutting out a window and door. Put some pots and pans in and play at being a customer with them as the shopkeeper using pennies.
- Counting – Language and numeracy are fundamental skills that we learn from our parents. So counting out loud even early on can familiarise a child with numbers. One thing you could do with a toddler is paint colourful dots on a sheet of paper and count them out loud together. This will encourage the child to vocalise numbers and set the foundations for an appreciation of numbers and counting.
- Watch and learn – Let your little one see you pay for things, and establish the pattern of behaviour in their mind: in order to get the shopping, mummy or daddy has to give some money. For older children you could let them participate, though keep an eagle eye on where the change goes!
5-10 years old
- Savings reward chart – A smart way of encouraging children to adopt a savings mentality. If they have a toy in mind, say the latest Lego space station or Nintendo DS game, cut a picture out of a magazine and draw a Blue Peter style “totaliser” to chart their money saved. Keep a jar close by and let them mark off the increments towards their goal by sticking stars on the chart. Be disciplined though, and make sure they don’t see the money saved as a sweet fund every day!
- Jobs around the house – Understanding that work and being helpful can result in some pocket money and may even take the strain off parents on the cleaning front. Set 5 simple weekly tasks and decide how much each one will cost, then put the money in the savings jar mentioned above.
- Wants versus needs – Establish the difference with your child between what they want, and what they need. They may need a new school pencil case, but they probably want a new bike. Talk to them and explain sometimes it is better to put money into the thing they need, and hard work will result in the things they want.
10 – 16 years old
This age group is critical because of the huge changes that take place in life that will establish how a child perceives, saves and spends money.
- A current account – Many parents will feel the time is write to open a basic bank account for their child to give them some independence and lessons about managing money, security and saving. Parents can use this as an opportunity to explain how banking works.
- Pocket money / a first job – A part time job in the holidays can be a great way to earn some money, gain some experience and meet new people. Whether it is mowing lawns, a paper round or cleaning cars.
- Talk about goals – Your child will rapidly be becoming a young adult and saving for a goal such as a trip abroad, university, or a career. The earlier they can establish goals, the earlier you can work out a financial plan as a family to help them get to where they want. This summer young Olympians including Yohan Blake, Greg Rutherford and Laura Robson are great examples of how aiming for goals can lead to great things. It will have taken discipline, sacrifice and financial backing – but as the saying goes, “Anything in life worth having is worth working for.”
16 and Upward
- University – The big decision will be whether your child will want to enter higher education in the pursuit of a degree or not. If your child decides University is for them, sit down and look at their savings, talk about a budget and how much the family can support them. Research funding help and the best available savings plan for them. The personal finance experts at The Daily Telegraph have just published an article on Student finance: how to manage your student finances, from bank accounts to online discounts, which makes for interesting reading.
- ISAs – Your child will become eligible for standalone ISA investments on their 16th birthday. They could also invest between £15 and £25 a month as part of a Family Flexible Plan, which is run by Scottish Friendly for families in the UK. The purpose of the plan is to let you invest as a family and beat the taxman together! You invest for 15 years but each family member’s policy has built in flexibility, allowing you to cash in your plan early if needed. This is over and above other tax-free allowances such as ISAs. Again, you must remember that tax treatment depends on your individual circumstances and tax law may change in future. Also, if you access your plan value before 10 years you may have a tax charge to pay as well as a £50 deduction from the cash-in value.
We hope these basic tips come in handy when thinking about children’s finance. The key thing is to speak openly about saving and investing. Allow children the right amount of responsibility as they grow and make sure they develop a simple and regular savings habit that helps them towards their goal.
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.
Reference
[1] Independent Commission on Fees http://www.independentcommissionfees.org.uk/
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
Savers and investors can learn from Spain’s footballing style
It was the performance that other teams now aspire to mimic. The one which raised the bar for others to try and match. The Euro 2012 final between Spain and Italy may not have been the edgiest final in history, but in terms of a footballing display, and the accolades won (including a third consecutive international trophy, retention of the trophy, best player of the tournament award from midfielder Iniesta and tournament Golden Boot for Fernando Torres) it is difficult to find a better example of getting strategy right.
One of the biggest talking points has been the emergence of a new formation in international football. Only Spain would dare to start a major final with a goalkeeper, four defenders, six midfielders and no striker. The fact that it proved to be the undoing of rivals such as Portugal and Italy speaks volumes, but it showed an acute understanding of what they were trying to achieve during the tournament.
Commentators have called the tactics “unconventional”, “boring”, “maverick” and even “negative”, but who can argue with a four nil victory in the final of a major international tournament. Traditional thinking suggests that going “strikerless” is akin to walking into battle without a sword. But it worked for Spain; overturning 30 years of 4-4-2 thinking currently employed by the majority of successful footballing nations. However, in each game, slowly, inevitably, safely and surely, they found wins and avoided conceding goals in a masterful way.
If you apply the Spanish midfield maestros to savings and investing, at a simple level many think that you need the spectacular; a Rooney-type risk and return relationship. However, it can be argued that, just like the Spanish coach Vicente del Bosque, there is value in aspiring to be different. Spain won the tournament through steady, methodical, possession play, where the aim of the game is simply to not lose the ball – which is the absolute essence of football.
The staunch objectors and even some pundits have come forward already; football without strikers is tactical heresy. Ask any neutral when you watch the fluidity of play, even without goals, observing Spain is truly an amazing experience. From a financial perspective the comparison is obvious at the current time with superstar bankers stealing the headlines for the wrong reasons. The culture of superstar fund managers and trading gurus has been found wanting in volatile times.
In boom times the play was all too familiar, the strikers of the financial world dominated a 0-0-10 formation with everyone looking for a fast buck and when they got it they blew it because they didn’t value it, or worse they invested their fast bucks in even faster bucks, only to lose it all. The contrast between the success of the Spanish team and Spain’s domestic economic predicament could hardly be more startling. The goal was rooted in the ‘group think’ of a property boom, where cheap credit flooded the market and sent house prices to levels which were completely unsustainable, see http://en.wikipedia.org/wiki/Spanish_property_bubble for some stats. The insanity was topped off by the ever present sign of a market about to implode.
Ramos, Casillas, Villa and co show us clearly that the studied, methodical and “boring” may not only be successful but eminently more rewarding than a quick buck. When you work hard and build your rewards in time you may appreciate them much, much more.
Likewise, when it comes to your own finances, a Spanish approach could prove to be the method to follow. Perhaps the way to sustained wealth in the future is not a quick buck looking for the next boom and getting out just before the bust, but slowly and surely building your personal wealth patiently over time. It’s not flashy but you will value your effort and take pride in your habit, you may grow in confidence and do even more.
Spain has a lot to teach the world about football and indeed economics, just take your lessons from Vicente del Bosque.
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.
Saving and investing for the future
It’s fair to say that many of my female friends are confused about the best way to save for retirement. They know they have to do it but just keep putting it off. After all we’ve all got far more pressing priorities: new decking for the garden, a family holiday, even a savings account for the kids. But I know deep down it’s an absolute essential that my friends and I must take the issue of saving for retirement more seriously if we want to enjoy and embrace worry free finances in old-age.
I read recently that the gap between men and women’s retirement income is narrowing but women still have less to retire on. The typical sum men can expect to retire on in 2012, including company and state pensions is £15,500. Women can expect to retire on £12,2501.
Here‘s some of Scottish Friendly’s top tips to help my financial planning for saving for the future:
1. Do something about it now.
Regardless of age, stage of life or income, it’s really important for women to start taking retirement saving and investment seriously. It’s not a luxury….it’s an essential and, simply put, the earlier you start putting money away, the more you will potentially have to enjoy when you finally come to retire.
Most companies allow you to contribute to a pension scheme and many make reasonable contributions to help boost your pot. If you don’t like the idea of locking your money away, especially when it comes to your own personal savings and investments, then consider an ISA. Get into the regular habit of putting money away every month – soon you won’t even notice it coming from your monthly pay cheque.
2. Exploit the flexibility of an ISA.
ISAs are accessible; pensions generally aren’t. You can contribute as much or as little as you like to an ISA, subject to the annual ISA allowance, currently £11,280, and change the amount to suit your income at the time. For example if you take maternity leave, you can reduce your payments to the bare minimum (or even stop them) but can still contribute to your pot.
What’s more you can calculate how much you are going to save and invest over the plan period, which makes planning for the future a whole lot easier.
But one of the biggest benefits of an ISA is that they are completely tax free (other than taxes on dividends from UK companies) which means much more money for you and less for the taxman.
The two most common ISAs are a Cash ISA or a Stocks & Shares ISA. A Cash ISA is quite simply a savings account which holds your cash and earns interest. A Stocks & Shares ISA is an investment ISA which means your money can be invested in the stock market, property investments and company and Government bonds. Importantly using a Stocks & Shares ISA effectively doubles your ISA allowance when compared to just using your Cash ISA. So why pay more tax than you need to?
3. Decide how much you can afford to save and invest – then get started!
For many women, especially those with young families, it’s very difficult to put any money aside from their monthly income. With that in mind it’s important to sit down and really work out how much you can realistically afford to save and invest. But remember putting aside something for retirement should be a priority and not just something you do when you’ve got extra cash.
Think about what you waste money on every month. Can you cut down your daily Starbucks coffee to three a week or shave £10 from your weekly food shop? This might just allow you to put away an extra £50 a month to your ISA.
The benefit of using an ISA becomes clear even when you are only putting a small amount away. Unlike a pension, you are completely in control and your money isn’t locked away forever. That means getting started can be much easier with an ISA. Once you start a regular savings and investment habit you’ll soon realise how easy and painless it can actually be. Before you know it you’ll be setting aside monthly sums of money that right now you just never thought possible.
4. Share in your partner’s dreams
Retirement should be about enjoying life, and doing the things you didn’t get to do when you were working. For many, that means sharing exciting experiences with a partner so talk to your other half about their retirement plans. Do they match yours?
Are you both saving and investing enough to do what you really want to do together? Make sure between the two of you, you are saving enough to enjoy your well-deserved time together.
So now I know the importance of saving for my future and I’ve got some really good ideas on how to do it…..the challenge now is to get on and do it!
For more information on Scottish Friendly’s range of tax free savings plans or further information on saving for retirement log onto www.scottishfriendly.co.uk. But remember Scottish Friendly does not provide financial advice and can only give information on its own products. If you are in doubt of any aspect of financial planning, you should contact an independent financial adviser.
1Source: Sky News, 8 June, from a report by Prudential Insurance.