Categories
Savings

Where to Put Your Savings

If you want to build up some savings or already have some then it is a good idea to think about where you are going to put the money. There are lots of different options and it can be rather confusing. It is therefore worth getting a grasp of the basics so that you can make a better decision as to where you might want to put your money and hopefully will be in a position to research it further.

Instant Access Account

An instant access account will allow you to be able to get hold of your money right away. There are different types of instant access account but it can be good to look at the different types if you want an account like this. You need to think about how quickly you will need to get hold of your money and if it is likely that you will need some for emergencies then this is the type of account you want. Some people will choose to keep some money in an account like this and then some in an account that pays higher interest. An instant access account will often have lower interest than accounts where you tie your money up.

Notice Account

This sort of account will usually offer a better rate of interest than a current account but you will need to give notice when you want to tale money out. This could be 30 days or a few months, it will vary a lot depending on the specific account that you choose. You will therefore need to think about whether you think that this will be the right sort of account for you. If you are prepared to wait for the money that you need, then it could very well be suitable for you.

Fixed Term Account

These accounts tie money up for a certain amount of time, normally between one and five years depending on the account. They are often bonds and you may also need a certain amount of money to put in or be limited in how much you can put in. They tend to pay a higher rate of interest but they will obviously put your money away so you cannot get hold of it. Therefore, it is really only for money that you know that you will not need. It is worth noting though that for some bonds you are able to get your money out early but there is a penalty so you will not get all of the interest that you have earned.

Income Account

An income account will pay you a monthly income – in other words the interest you earn will be paid to you into your current account. This has disadvantages in that the interest is not added on to the account and so you do not get compounded interest (interest on your interest) which can help the value of the account grow more quickly, but it an provide you will an income which can be particularly useful if you want to boost your income or if you are in retirement and need an income.

ISA

An ISA is a tax free account. If you are a lower level tax payer you can earn up to £1,000 a year in interest without paying tax and if you are a higher rate tax payer that is £500 and if you are the highest tier of tax payer then you pay tax on everything you earn. So, some people will benefit more from a tax free account than others. Often the interest rate is a bit lower than other types of accounts but you have to calculate whether it will be better to use an ISA if you are getting taxed on your interest form the other account.

Categories
Student Loans

Is a Student Loan a Good Idea?

There are many people that are afraid of student loans. Others use them without any fears at all. Many parents and potential students get concerned about things they have heard about loans and it is important to remember that a student loan is good debt. It is something which should advantage you. It is worth looking at some of the common myths and thinking about whether they are correct.

You Leave University with Massive Debts

It is worth thinking about student loans in a different way to other loans. You do not pay repayments in a regular way and the debt is written off after 30 years regardless of how much you have repaid. The repayments are made through your tax code, which means that you do make repayments in a regular way. Repayments are only made when earnings reach a certain level and they are only a very small percentage of earnings. This means that they are affordable and however much you borrow, the maximum you can repay in a year stays the same and you may not have to pay the maximum if you are not earning enough. This means that how much money you owe is irrelevant.

You Will Never Pay the Debt Off

This could very well be true. It could be the case that you will never be able to repay the debt that you owe. However, this does not matter. Unlike a standard loan, you will not have to repay it all if you cannot afford it. You will have thirty years to repay it and once that time is over, you will not have to repay any more. So, whether you repay nothing or some of it, it will all disappear once the thirty years have passed. Some people will earn enough to repay the whole debt but you have to start on a high income and keep working full time for the whole thirty years.

The Loan Will Make it Harder to Borrow Money in the Future

It is worth noting that a student loan does not appear on a credit report. This means that you will not be penalised for it when a lender is doing a credit check. The only circumstance where it could make a difference is with a mortgage. This is because the lender is likely to check your bank details closely to see if you would have enough money to meet the mortgage payments. Therefore, they will look at money coming in and out. However, if you pay rent already and the mortgage is a similar amount then this should be fine. You should not be taking on more debt than you can afford to repay anyway.

This Loan Will Lead to Loads More

There are people that think because a student starts off their adult life borrowing money, it will make them think that borrowing is an acceptable thing and they will continue to do it. It is hard to know whether this will be true or not as it is likely to vary. It might be the case that they will put off borrowing rather than encouraged to do more as well. Even if they do borrow more this may not be a bad thing. As long as they are borrowing to better their situation and they can manage the repayments then borrowing need not be a bad thing.

The Loan Will not be Enough

Some people worry that loan will not be enough for the student to manage on. It is true that the loan is changed depending on parental income. Every student will get enough loan to cover their fees, but the other part of the loan, to cover living expenses, will be means tested. Each student will get some, but if the household they live in has a high income in it, then there will not be any more money offered.

Categories
Credit Cards

It is Worth Using Your Credit Card?

Many people have credit cards, but some people use them more often than others. Some people worry a bit about using their credit card and others do not worry. But should we be worried or should we be using as much as possible?

Advantages of a Credit Card

  • Having a credit card means that you can buy things right away and can delay paying for them. You will be able to pay in full for the items when the statement arrives or you can just pay a minimum amount and borrow the money for a while. You can keep the loan for as long as you want which means that there is no pressure to repay it quickly – you will just have to repay a small minimum amount every month.
  • Some credit cards have a cashback feature. This means that for everything you buy with the card, you will get cashback on that item. The percentage of cashback that you get will be really small though, but it can still be worth doing as you can get some money off your next credit card bill.
  • Some businesses these days will only accept payment by credit card, partly for hygiene reasons and partly for ease of processing payments and so it could be very useful to have a card to buy from these.
  • If you buy things online then there is always a risk that you will never receive the item or not get what you were expecting. Although there is a law that you have to be able to send items back for a refund in the UK, even if it is not faulty, this rule does not extend to foreign sellers. You may also find that the seller will just not behave in a reputable way. If you buy with a credit card then you have some come back through the credit card company. If you have tried already and had no success to get a refund, then they will be able to credit the money back to the card and you will not lose out. It may take some time but it can offer peace of mind when you are purchasing things.

Disadvantages of a Credit Card

  • If you do not repay the full balance of your credit card you will have to pay interest on it. The card issuer will let you know how much the interest is going to be so you will not have a nasty surprise. Interest rates can be quite high compared to other loans so it is worth checking them. You should compare the rates between different cards, particularly if you know you will not pay off the full balance each month, so that you can make sure that you are paying more than you have to.
  • The cashback feature can make the card more expensive. Many cards which offer this do have higher interest rates. You will therefore have to calculate whether you think that it is worth it. If you are very confident that you will never have outstanding debt as you will always pay the card off in full, then the rate will not be important, but if you know that it is likely or are not sure, then it is better to look for a card with a better rate.
  • The cashback feature is also risky because it could be that you use it to justify spending a lot of money. You might decide that you want to avoid this risk and not get a cashback card, but you may feel that you will just use the card as normal and it will not impact your shopping habits but just give you some extra cashback then it will suit you.
  • The convenience and security of a card can potentially lead to you using it more often. While this can be fine, you need to think about whether you are staying in control of your card use. As you do not handle cash, you will find it harder to keep track of what you are buying and you may even not really bother to look at prices. You might therefore spend more than you can afford and this could lead to problems when it comes to paying off the card.
Categories
Education

How to Teach Teenagers About Money

It can be difficult to teach teenagers anything at times. They will tend to think that they know more than you and they may also not be prepared to listen to their parents. However, it can be an important time to talk to them about money. This is because they will start to have access to more money, perhaps because they will get a job or a student loan and they will need to understand about budgeting. It can be a difficult conversation to have but it will be a worthwhile one. There are some things that you can do to help.

Start the Conversation with Something that Will Draw them in

It is not always easy to start the conversation but it is worth trying to do it at a time when they have no choice but to listen. Perhaps when you are in the car with them, at the table having a meal or on a walk. Then they will not be able to get away. However, they may still be plugged into a phone so you will need to make sure that you grab their attention so that they listen. Perhaps telling them that you can give them some tips to make them wealthy or something equally appealing to them. Hopefully you will know them well enough to know how to phrase things so that you can get them involved in the conversation.

Explain the Consequences of Mistakes

It can be good to start with explaining what might happen if they make mistakes with money. This could help to make them realise the importance of managing their money carefully. For example, let them know that they could run out and might not be able to make ends meet and that a young age borrowing beyond a student loan can be difficult as can repayment. If you have made mistakes with money then tell them about those mistakes as this could help you to get through to them. Hearing about peoples personal experiences can make it feel more real rather than just hypothetical situations which they might think will just never happen to anyone.

Explain the Gains from Doing things Well

It is also a good idea to explain to them what they will gain from doing things well. If they are able to budget well and manage their money etc, they will obviously feel better. They will feel more positive, be in control and maybe even be able to put some money into a savings account so they have some behind them to fall back on. Try to explain to them incidences of when you were able to do this and how it made you feel as well.

Buy them a Book

If you having trouble explaining yourself or feel that you are not getting through then buying a book for them could be handy. There is a text book which explains all about money for teenagers but they might want to start with something a bit lighter and a bit more fun. There are lots of books available and you will need to think hard about which ones will be the most appealing to them. You could always get a selection and encourage them to take a look at them to see which works for them. If cost is a problem you may be able to get some books from the library or some free kindle books. There are also websites with plenty of free information. It could be even better to see if there is a youTube channel with handy videos that could be more appealing to some teenagers than reading a book.

Categories
Insurance

How to Keep Down your Home Insurance Costs

Most of us have some form of home insurance. Normally we would want to cover the cost of the building if we own it or are buying it with a mortgage and the contents even if we do not own it. However, home insurance costs a lot of money and so you may be interested to work out how to save money on it. There are some tips below on how you can save some money on your insurance which you might want to try out.

Compare Insurers

It is well worth comparing the cost of your insurer with others. You may find that you are paying more than you need to. You can check using a comparison website and it will give you an idea of what different insurers are charging and you will be able to decide whether you think that you are paying too much. You will need to check to see whether the cheaper insurers are going to provide you with adequate cover as they might be cheaper because they do not cover you for so much or perhaps their service is not as good. However, you should be able to find this out by looking at the terms of the cover or contacting the company to check what it covers and reading reviews. It might seem like a hassle but you can potentially save hundreds of pounds.

Negotiate with Current Insurer

If you are not keen on swapping insurer then it could be worth negotiating with your current one. Take a look at the prices that you can get form other insurers and then ask your current one whether they can beat that price. Explain that you are tempted to leave but you do want to stay with them and what can they do to keep you. Some will not be able to lower their price, but some will be able to and there are some that will automatically lower it if you ask and so you could be missing out on a reduction. It might feel cheeky to ask them if they can lower the price, but they so often are willing to reduce it, you will be missing out if you do not ask.

Pay Yearly not Monthly

It can often be a lot cheaper if you pay the insurance premium yearly rather than monthly. Obviously, you will have to be able to come up with that lump sum of money. However, if you choose to take the monthly option, it will be easy to manage the payments, but you will find that you will be paying more in most cases. Some insurers will not charge more for monthly cover and so you will need to think about whether it might be cheaper to go with one of those, if monthly is your only option. It can be worth considering whether you can save up during the year so that you can afford an annual payment next time the insurance is up for renewal.

Increase the Excess

An additional way to save money could be to increase the excess on the insurance. The excess is the amount of money that you pay when you make a claim. So, the insurer will ask you pay some first and then they will pay the rest. They do this to prevent you making small claims. The higher the amount you are prepared to pay, the lower your premium will be, although there will be limits. You will need to think about what you think you will be prepared to pay before making a claim and what you will be able to afford.