Those of us with children may have already faced the difficult situation where your child asks for money. Should you give it to them? If so, how much and under what conditions? Should you ask for the money to be repaid? These are difficult questions. Not only do they potentially impact a financial plan, but they can also influence your child’s character regarding money as they grow up. In this guide, our financial planning team at WMM offers some thoughts on how to be a good “Bank of Mum and Dad” in 2021. We hope you find this content useful.
The UK may be edging its way out of lockdown, yet sadly there is still no shortage of unsavoury people seeking to exploit the situation for financial gain. Here at WMM, we wanted to draw your attention to five types of scam which have become more prevalent during the 2020 coronavirus pandemic. Please get in touch for more information or if you are at all concerned about the security of your financial plan.
It’s natural to think of debt as a terrible thing which should be eradicated as quickly as possible. So when young people are asked whether their student loan should be paid off early (perhaps using a lump sum from an inheritance), many automatically assume they should do so. Yet is this really the wisest use of your money?
As twinkly lights and festive carols start to take over the high street, it is very easy to give in to the temptation to spend. While it is always worth keeping an eye on the budget, it is equally important to ensure that your purchases are protected as far as possible.
Your Consumer Rights
When buying something, you have certain rights that the retailer is required to uphold. Goods must:
- Be of satisfactory quality
- Be as described
- Be fit for purpose
- Last a reasonable amount of time
If your purchase doesn’t meet these standards, you are entitled to a full refund within 30 days.
For online orders, you can return items for a full refund within 14 days in most cases, even if the item is not faulty and you have simply changed your mind.
Digital content is treated slightly differently, but you should still expect fair and reasonable treatment from the seller.
The rules for buying services are less clear cut, but the Consumer Rights Act dictates that services should be provided:
- With reasonable skill
- Within a reasonable time
- At a reasonable price
Most reputable shops and service providers offer more generous policies. After all, they want their customers to keep coming back.
It is not always as simple as this. Companies fail on a daily basis, sometimes without warning. Sticking with known brands doesn’t always help, as customers of Thomas Cook and BHS will tell you.
And this is before we start to consider criminal activity, such as online scams and identity theft.
Credit card purchases are covered by Section 75 laws, which means that your credit card company is jointly liable with the retailer.
The following situations would be fully covered under Section 75:
- Most purchases of between £100 and £30,000, for reasons of fault, non-delivery, fraud or company failure.
- Deposits on larger purchases, even if under £100. For example, you could pay a £50 deposit on a £500 sofa, and you would be fully covered even if you used another payment method for the £450 balance.
- In some cases multiple purchases totalling £100 or more are covered, e.g. items purchased as a set.
- Costs arising from the initial problem. If an event is cancelled, you may be able to claim for travel and accommodation costs.
- Store card purchases, where the card is provided by a third party company and not the retailer directly.
- Purchases made at an earlier date with a card that is now expired or cancelled.
Section 75 rules would not cover you in the following circumstances:
- Where the purchase is under £100 or over £30,000. Higher value purchases are covered by different rules which can be relatively complex, and outside the scope of this guide.
- When buying a basket of goods totalling £100 or more. The protection applies to individual items, not the total purchase value. Exceptions may be made where items are purchased as a set.
- Credit agreements that are held directly with the retailer, for example, catalogue accounts.
- Where a third party payment processor is used. PayPal transactions are not covered by Section 75, even if the payment is ultimately made by credit card. PayPal does offer some protection but are not bound by law to do so. Proceed with caution when using other, lesser-known payment processors.
It is usually worth approaching the retailer first, as this can result in a quicker, and more satisfactory resolution. However, you do not have to do this under Section 75 rules, as the credit card company is equally liable.
If your credit card provider won’t help, and you believe you should be covered, you can contact the Financial Ombudsman Service to make a complaint.
While debit cards do not benefit from Section 75 protections, all is not lost. Visa, Mastercard and American Express are all part of the Chargeback scheme. This not only protects debit card purchases, but also credit card purchases of under £100.
This is a useful failsafe for smaller purchases, but it is not enshrined in law. It is offered by the card issuers at their own discretion.
The circumstances in which Chargeback may be used are similar to the Section 75 rules, and include fault, non-delivery, fraud or company failure.
The key differences between Section 75 rules and Chargeback are:
- Chargeback claims are not protected under the law.
- In most cases, claims must be made within 120 days of purchase or expected delivery. Some exceptions are made. For example, where the claim is for a flight, the 120 days starts on the planned day of departure, rather than the date of booking.
- While Mastercard imposes a minimum claim level of £10, no minimum applies to the other card issuers. Purchases of under £100 are covered.
- Only the value of the actual transaction is covered, not the full purchase if additional payments were made by other means.
To start the claims process, contact your bank and tell them you would like to dispute a transaction under the Chargeback scheme. This may or may not be straightforward, as branch or contact centre staff are not always aware of their own rules. Placing the request in writing, while a little slower, can be more effective at reaching the right person.
There is no statutory timescale by which the refund needs to be processed. Large scale company failures (such as Thomas Cook) can increase the demand on the service and lead to much longer waiting times.
If your bank is unwilling to help, or takes more than 8 weeks to reach a conclusion, you can complain to the Financial Ombudsman Service.
While both credit and debit card purchases are protected to an extent, only credit cards are covered by law. You may also be able to claim for consequential costs arising from the initial problem, and for the whole cost of the item, even if you only used a credit card to pay the deposit.
So if your Christmas shopping involves games consoles, bikes or the complete Harry Potter Lego set, reach for your credit card first.
Debit cards still offer some protection, so are the ideal payment method for stocking fillers, wine and turkey.
If you are still using cash, this might help with your budget, but sadly does not qualify for any level of protection other than the retailer’s usual responsibilities.
Please do not hesitate to contact a member of the team if you would like to find out more.
If you are reading this article about joint finances and have just gotten married, then first of all – congratulations! Money is a hugely important topic in any relationship, and this article aims to help you approach this subject more clearly to find a solution which works for you.
As professional financial advisers here at WMM, we see many clients with a range of financial arrangements and ways of managing money with their spouse or partner. Here is just a brief snapshot of this diversity:
● In one couple, one person (i.e. the breadwinner) might hold the majority of the couple’s bank accounts (in their own name). There might not even be a shared bank account between the two people. The other person (i.e. the home-maker) might not even have their own account, but simply keep money in a purse/wallet, which they can spend and top up from the other person when they need to. This is arguably a more “traditional” model of managing a couple’s finances, and it works for some people.
● On the other side of the spectrum, there are couples where there is no joint bank account at all. Rather, each person has their own account (or set of accounts) in their own name. If this couple lives together, then quite often the bills will be “split” between them. Perhaps one person pays for the mortgage, for instance, whilst the other covers the food and other household bills. This is often labelled a more “millennial” or “modern” approach to couple’s finances, and again, it works for certain couples.
Other couples adopt a “hybrid” approach. Some choose to set up a joint account when they move in together and then shut down their individual accounts when all of their money is merged. Others open a joint account but keep separate bank accounts. In this case, the former could be used to cover the couple’s household bills, whilst the latter can be used for each person’s leisure spending.
So, which model is best? There isn’t a universal answer to this question, but there are certain advantages and disadvantages to merging your finances which you should be aware of. We’ll be covering some of those below. Please note that this content is for information and inspiration purposes only, and should not be taken as financial advice.
Pros of Merging Finances
● A sense of “togetherness”. Bringing yours and your spouse’s/partner’s money together into one account is arguably a good way to show commitment and trust towards one another. It also can create a stronger sense of “being a team” in life together, using your combined resources to solve joint financial problems.
● Even playing field. If there is a wide income disparity between both of you, then bringing your money together can allow both of you to live more comfortably – rather than one of you struggling to keep up with the other.
● Joint liability management. If you live together, then you will share various expenses to do with household costs (e.g. bills, utilities and mortgage). You might also be jointly responsible for children, which brings other expenses. Managing these costs from a joint bank account can simplify paying for these things.
● Easy access during a tragedy. It isn’t nice to think about, but if one person in the couple were to die then having money in a shared account makes it easier for the surviving partner/spouse to access funds which they might urgently need (e.g. to help cover funeral costs).
Cons of Merging Finances
● Separation. Again, this isn’t a nice scenario to think about – but it’s important. Should you and your partner/spouse one day split up, then having all of your money in one joint account can make things difficult. If you do not have your own bank account, then you will need to open one to eventually move money across into it. In some sad cases, one person has withdrawn all of the money out of spite – leaving the other person in a perilous financial position. These dangers can be mitigated somewhat if both people keep an individual bank account with some backup savings in them. In this case, however, it’s important to consider how you want to approach this topic with your spouse/partner due to its sensitivity.
● Financial vulnerability. If you share money with your spouse/partner, then their financial decisions can sometimes have a greater impact on you. For instance, if one person is a big “spender” and the other a “saver”, then this can create tension or arguments as both people watch the other person’s spending behaviour on the joint account.
● Lost independence. When you share an account, then both of you can see every purchase and withdrawal that each person makes. This can create a sense of “losing control” of your personal spending decisions since you might feel that you have to justify your spending more often to the other person.
On balance, we would argue that for many people it is a good idea to consider opening a joint account once your relationship has reached a high degree of trust and commitment.
It can particularly make sense for lots of couples when they move in together and have to manage shared expenses regularly. In many cases, it can be a good idea for such couples to have a joint account for these purposes, but keep individual accounts for personal and leisure spending.
However, each couple is different in their financial goals and circumstances and it’s important, therefore, to not be too prescriptive. There are indeed cases where it makes little sense for a joint account to be opened, and that’s fine (e.g. certain couples which do not live together).
Did you know that setting aside just one morning could result in thousands of pounds more in your pocket over the next 12 months?
With Brexit dominating the news at the moment and living costs potentially set to rise, it certainly wouldn’t hurt to look at ways to reduce your expenses and build up a savings buffer.
As a financial planning business, we wanted to share some of our thoughts in this article on:
● How you can start setting a spending plan.
● Ways you can reduce some of your outgoings.
● Suggestions for clearing costs incurred by debts.
● Ideas on how this money could be put to better use, both short and long-term.
Before we get started, please note that this article is for information purposes only. It does not constitute financial advice and should not be taken as such.
For financial planning and advice about your own personal goals and situation, please get in touch to speak with us.
Setting a spending plan
An important first step to improve your savings and spending efficiency is to take stock of what you earn, how much you spend and what you spend it on.
The best way to do this would be to record your spending in a notebook or smartphone app, to determine your average monthly spending. Most of us are not that organised, however, so you might need to look at your bank statement for the past thirty days and go from there.
You will not know how drastically you need to rein in your spending until this picture is clear in your mind. Here are some obvious expenses to look at:
● Mortgage payments & household bills (e.g. gas, electricity).
● Mobile phone bills and broadband.
● Food bills.
● School fees & childcare costs.
● Car & transport costs.
● Debts & finance payments
It can be helpful to divide your expenses into different categories in a similar way to the above, as this can really help make your estimates more accurate.
Suggestions for reducing costs
There are literally hundreds of ways you could potentially reduce your outgoings. Here are just a few suggestions for you to consider:
● Check your Council Tax band. Many people are in the wrong one without knowing it. Since this tax goes up about 4.5% each year, it’s worth making sure you are not paying more than you should be.
● Check your broadband. Some people pay over £600 a year by just staying with their current provider, rather than taking advantage of promotional deals which can bring your bill down to as little as £12 a month.
● Take a hard look at childcare. The equivalent of one parent’s wage can be entirely devoted towards childcare costs, so it’s always a good idea to look at whether potential savings can be made here. For instance, are there any free summer holiday activities you can take advantage of? Does your employer offer any help with childcare costs which you are not using?
● Direct debits. This is another huge area where people’s money disappears without their noticing. Whether it’s a £40-per-month unused gym membership, or unused subscriptions to online services such as Audible and Spotify, you could save over £1,000 over the course of a year just by making some sensible cutting decisions here!
Clearing a high-interest debt quickly can be one of the best ways to save money over the longer term. Leaving credit cards unpaid and building up interest, for instance, can easily amount to hundreds of pounds per year.
However, cutting your outgoings isn’t just about addressing the obvious debts such as credit cards and personal loans. It’s also worth taking a look at your mortgage, which is likely the biggest debt you will have as a homeowner.
Remortgaging your home, for instance, can sometimes open the door to a lower interest rate and reduced monthly mortgage payments. This frees up some extra cash in the short term, and also potentially save you tens of thousands more in the form of reduced interest down the line.
Putting money to better use
Hopefully, by this point, you will have already identified some areas where you could save hundreds or even thousands of pounds per year through careful financial restructuring.
What, then, should you do with the extra cash now sitting in your account as a result? It completely depends on your unique circumstances and goals, but here are some ideas that everyone should consider:
● Think about building up an emergency fund. Ideally, this should amount to between 3-6 months of your living costs. Not only will this help keep you afloat in the event of an expensive, unexpected expense which could otherwise plunge you into financial trouble (e.g. covering the costs of a sudden broken boiler).
● Take a look at your pension. Would it be worth contributing more of that extra cash towards your long-term future? Many people are just putting as little as 3-5% of their salary towards their workplace pension scheme, which is unlikely to cover your lifestyle in later life on its own (even when combined with the state pension). Putting even just £50 a month more towards your pension could result in thousands more to support you in later life, when you retire.
● Consider investing. It’s easy to spend extra money on things which cost you money – such as a new car, or a motorbike. There’s nothing wrong with treating yourself from time to time, but what if you spent some of that instead on things which could actually make you money (i.e. an asset)? For instance, perhaps you have a goal to save up for a deposit on a property within the next 10 years. One option would be to build up some saving towards this goal within a Cash ISA account, but another option might be to invest your money in a diverse set of investments in order to try and get a better investment return at the end of the 10-year period.
Spousal bereavement is an unimaginably difficult time. Not only are you having to process your grief, but there is the whirlwind of sorting through the estate and finances.
In this midst of the complexities, many people end up needlessly paying tax on assets and money inherited from their lost loved one – particularly when it comes to ISA savings.
Most people need all the emotional, relational and financial support they can get during their bereavement. So make sure you don’t miss out on these important tax breaks below.
Keep your tax-free wrapper
In 2015, the UK government introduced the Additional Permitted Subscription allowance (APS). This means that if your spouse or civil partner dies, then you can claim extra ISA allowances.
Normally, in 2018-19 you can put up to £20,000 per year into an ISA (or set of ISAs) without the amount being liable to tax. Under the APS scheme, however, you can inherit your deceased spouse’s/civil partner’s ISA savings without the amount being taxed.
The APS scheme is not widely known, unfortunately, so it is estimated that as many as 15% of widows are missing out on these benefits. With the average APS claim currently standing at around £55,000, clearly more needs to be done to inform grieving people about this important source of financial provision and support.
Here are some important things to know about the APS scheme:
● You can apply for the additional ISA allowance if your spouse or civil partner died on or after 3 December 2014.
● You must have been living together at the time of the death. You must not have been separated or estranged from your spouse or civil partner.
● Subscriptions cannot be made to or from a Junior ISA.
● Non-UK residents can make subscriptions.
● You can make the subscription to a wide range of different ISA types including stocks and shares, innovative and cash ISAs.
How APS subscriptions are processed
As the surviving spouse or civil partner, you will need to speak to the deceased’s ISA manager to begin the APS process. This means providing them with sufficient evidence that they are satisfied you are their client’s surviving spouse/civil partner.
Important information you should consider submitting to the ISA manager therefore include:
● Your name and physical address.
● National insurance numbers.
● Dates of birth, marriage/civil partnership and the date of the death.
You will likely need to submit this information and other important details to the ISA manager via a formal application form.
In some cases, someone else might make an APS subscription on your behalf – for instance, if they hold Legal Power of Attorney (LPA). In this instance, the ISA manager will need to see a copy of the LPA and check the relevant provisions.
Valuing the deceased’s ISA(s)
It isn’t always clear how much your spouse/civil partner has in their ISA(s), and it’s important to establish this early on.
For instance, stocks and shares ISAs need to be properly valued so the ISA manager knows how much to put into your account. This can get complicated, as it involves referring to obscure laws and regulations such as section 272 Taxation of Chargeable Gains Act 1992.
Essentially, the ISA manager should carry out this valuation legwork for you. It’s a good idea to get the advice of a professional financial adviser particularly at this stage, who can look over the ISA manager’s valuation and ensure you are getting a fair deal.
Things can become even more complicated, unfortunately, depending on the date your loved one died and the number of ISAs they held.
If they died before 6 April 2018 and held numerous ISAs, then the ISA manager needs to take into account a single additional permitted subscription limit. This will need to account for the total value of all of the deceased’s ISAs at the time of their death.
If your spouse or civil partner died after the 6 April 2018, however, then the rules are slightly different. Here, the single additional permitted subscription limit is instead determined by the total values of each ISA at the time it ceased to be a “continuing account”.
Confused yet? Don’t worry if you are. This is a big reason why many bereaved people miss out on important tax benefits during this difficult time. Yet with the help of a professional financial adviser, you can make sure your interests are protected and get the help you need to navigate this complex tax landscape without it feeling overwhelming.
One important detail to bear in mind is the time restrictions on APS. If the APS is made as stock, for instance, then your subscription must be completed within 180 days of your spouse’s / civil partner’s assets distribution date.
If, however, the APS is being made in cash then you have three years from the date of death to complete the subscription. Or, you have up to 180 days following completion of the administration of your spouse’s / civil partner’s estate. Whichever happens first.
Bear in mind that if you do not act within the relevant timeframes, then you might need to gradually funnel your spouse’s / civil partner’s ISA savings into your own in order to minimise the tax involved.
For instance, if they had £60,000 in ISA savings and you contribute nothing to your own ISA(s) during a given tax year, then in 2018-19 you could put £20,000 of your spouse’s / civil partner’s ISA savings into your own ISA(s) without attracting tax. You would need to do this each financial year, however, over three years in order to move this money without facing tax.
As financial planners, it might be tempting for you to believe that we think so.
After all, why would we spend all day advising clients on pensions, tax and investments if we did not think to have more money would make you happier?
At Weston Murray & Moore our slogan is: “You have one life, let us help you live it.” So clearly, we believe money has an important role to play in making our clients happier.
However, we also believe that things are more nuanced than the simple equation:
Having more money = a happier person.
Really, we think that sensible money management is an important means to an end. That is, it helps you to achieve the goals in life that are truly important to you.
Let’s unpack the relationship between money and happiness a bit more…
Does having no money equal no happiness?
We all hear stories of terrible poverty in the world. Many people still live on under a dollar a day, for example, and struggle to feed their families. If a medical emergency comes their way, moreover, it can completely wipe them out financially.
Clearly, a base level of money is needed for humans to at least tolerate their existence – paying for essential food, shelter and other vital goods. Few people, we think, would dispute that.
Yet when you look at people on the lower income scales in society, there is usually a mixture of happiness levels across the picture.
For instance, some families have very little in the way of material goods but at the same time, they experience a lot of joy. Perhaps they have lots of children living in a small house, and they struggle to afford food and clothing. Yet in the midst of this, there is lots of fun and laughter. They do not seem too upset that they cannot afford a more lavish lifestyle.
Yet for other lower-income people, their existence is miserable and full of unhappiness. Perhaps they are saddled with crippling debt which they feel unable to escape from, creating a deep sense of entrapment. Maybe a family would like to move out of a high-crime area into a safer one, for instance, but they cannot afford to do so.
Does having more money mean more happiness?
On the other side of the coin (i.e. the wealthiest members of society) the situation seems to be similarly reflected. There are many wealthy people who are perfectly content. They enjoy the finer foods and also the most incredible holiday experiences. They live comfortably in large homes.
With such immense financial resources, how could these people not be happy?
Yet we all know of wealthy people who are deeply miserable! Perhaps they have multiple homes and expensive cars, yet their debts are hanging over them like a dark cloud, threatening to derail them at any moment. Maybe they worry about their precarious financial position due to market threats to their business, which ultimately supports their lifestyle.
Where financial planning fits into the picture
We deal with a wide range of financial matters and clients, and know all too well how complicated the relationship is between money and happiness.
If you are looking for the definitive answer on how people can address all of their inner angst about money, we, unfortunately, cannot provide it here.
Yet we can offer an important piece to start fixing the puzzle – and that’s through meaningful, effective financial planning.
Really, a financial plan starts with asking yourself what is ultimately important to you:
Is your deep desire to one day sell your business and retire early to enjoy a long-time hobby?
Is it to travel the world with your wife of thirty years?
Is it to leave a meaningful inheritance to your grandchildren, giving them the better start in life you wish you could have had?
Once you know the answers to these questions (what really matters to you and will make you happy), then you can then start planning towards making these goals a reality.
Simply having a financial plan can go a long way towards making you happier. Speaking from experience with our own clients, knowing that you are steadily moving towards your goals usually brings a huge sense of satisfaction, purpose and peace of mind.
Sitting down with an experienced financial planner can be immensely valuable when thinking about putting your plan together.
It might be, for instance, that some of your goals are not actually possible in light of your current financial situation. This can be difficult to come to terms with, but it is better to deal with that now and revise your expectations rather than hitting a shocking dead end in years down the road.
In many other cases, however, it is often the case that you can achieve much more than you thought previously was possible. Perhaps we could show you a planning opportunity which means you could actually retire earlier than you thought, for instance.
Or, maybe you find out (through estate planning) that you could leave much more to your grandchildren as an inheritance (tax-free) than you previously believed would be possible.
How could we round up everything we have talked about above?
In short, we believe that a key part to a happy life is having a clear set of meaningful goals in front of you, and putting a financial plan in place to move towards them.
Quite often, the key to happiness when it comes to money isn’t about having more or less of it. It’s about managing it well and committing it towards the things that matter.
If you would like to start talking to us about how to start putting a financial plan like this together, then we invite you to get in touch. We’d love to talk more with you through a free, no-commitment financial consultation.
Get in touch today!
We are fast approaching the ISA season (i.e. tax year end), and my thoughts turned towards making sure our clients maximise their allowances where possible. With this in mind, I thought I would pen some thoughts on the advantages of putting your money into an ISA, and, as there are lots of different types which one(s) should you chose?
We frequently advise clients on these questions. Simply put, an ISA (individual savings account) allows you to save money and gain interest, without it being liable to income tax.
ISAs are available to UK residents aged over 16 (except in the case of Junior ISAs). In 2018-19 you can put up to £20,000 per year into one ISA or across multiple ISAs. This limit is fixed for the financial year. Although generally, you cannot reset your limit by withdrawing money from your ISA, with some schemes you can, so not all ISA’s are equal!
Different ISAs do exist, offering certain options to the guidelines described above. So let’s briefly look at each one, with a note on some of their respective pros and cons.
Help to Buy ISA
This ISA is actually set to be phased out by November 2019. However, it is still useful to know about them in case you want to set one up before then.
Help to Buy can be an attractive saving mechanism for first-time buyers looking to save for a mortgage deposit. Under this scheme, you can save £1000 in your first month and £200 per month thereafter, tax-free.
When the time comes to putting down your mortgage deposit, the UK government will then add 25% (tax-free) to the amount in your ISA. This “bonus” is capped at £3,000.
This can be a great option for couples who are both first-time buyers, as you can both open a Help To Buy ISA. This means you could buy a house together and get up to £6,000 extra from the government as a bonus.
One downside is that the property you are looking to purchase must be valued under £250,000 (or £450,000 in London). You also need to use a solicitor when applying for the government bonus, which can be an extra cost of around £60 for an administrative fee.
If you have an ordinary savings account and you have lots of money sitting in it, then you might have to pay income tax on the interest you have gained (i.e. 20% on any interest over £1,000, assuming you are a Basic Rate taxpayer).
With a Cash ISA, however, if the money was sitting in here then the interest would not be taxed. The features of this type of ISA is very similar to a typical savings account, so you are usually able to withdraw money fairly easily.
You can transfer a cash ISA (e.g. from one bank provider to another one), although this can sometimes incur a transfer penalty. Check with your provider before moving money around.
Stocks & Shares ISA
Some people want to use an ISA to save in a tax-efficient way. However, we frequently talk to people who want to use an ISA to invest – in order to attain higher returns from the interest they generate.
A Stocks & Shares ISA is one way to do this. Here, the money you put into it is invested into certain financial products. These might include funds (i.e. company shares and bonds which have been pooled together), government bonds or other investment assets.
These ISAs are attractive because they can offer a higher return than a Cash ISA, or ordinary savings account. The profits you make will not be taxed. However, your money is usually locked away for at least a few years, which limits your ability to withdraw it. Moreover, the value of your investment could go up or down depending on performance.
Innovative Finance ISA
When it comes to investing, there are different levels of risk. Investing in UK government bonds, for instance, is usually seen as fairly low-risk because the UK government is widely seen as reliable when it comes to paying its debts.
Other investments offer higher potential returns, but are inherently more risky. For instance, peer-to-peer lending (i.e. lending money to other people/companies) is regarded as in this category.
One way you can do this is via an Innovative Finance ISA, which allows you to invest in riskier opportunities without being taxed (e.g. crowdfunding and property). You should think carefully before committing large sums of money to an Innovative ISA, as this should be done within the context of a balanced, well-thought-through investment plan. Speak to one of our Oxford financial advisers if you would like to know more.
The Lifetime ISA (or LISA) is a fairly recent scheme allowing you to save up to £4,000 a year. Whatever you put in, the UK government will add 25%. So if you put in the full £4,000 each year, you actually end up with £5,000.
The government bonus is capped at £33,000, which would actually take a long time to build up (e.g. starting your LISA at aged 18, and putting in £4,000 each year until your 50th birthday). You need to be over 18 when you open a LISA, but under the age of 40.
The main condition of a LISA is that the money must either be used for your retirement, or towards the purchase of your first home. Use it for another reason, and there would be a 25% charge – leaving you worse off than before.
Which ISAs do I need?
The answer to this question depend entirely on your own unique financial situation and goals. If you are looking to buy your first property in the next few years, for instance, then the LISA might be an option to consider. If you are over 40 and already have a mortgage, however, then this will not be open to you.
Currently, with the LISA and Help To Buy ISA both still on offer, it is worth considering which one might be better for your needs if you are looking to buy your first home soon. A big consideration here, of course, will be the value of the property you want to purchase. If it is likely to be valued over £250,000 then Help To Buy will not be suitable for you.
Regarding Cash ISA, Stocks & Shares ISAs and Innovative Finance ISAs it can really help to discuss your investment strategy with an experienced financial planner. Due to the different levels of risk and potential returns involved with each ISA, it is important to consider which option (or balance of options) might best suit your risk tolerance and financial goals.
In recent client review meetings, I have been asked about the options for University saving and the impact on the family budget. Having a son currently enjoying his gap year in Japan means this was close to our hearts when originally setting our own plans. With that in mind, I thought this article may be helpful.
With university tuition fees in England now approaching £9,250 per year, many young people are understandably questioning whether higher education is worth the investment.
We have many clients with children asking such questions. Given the importance of education to one’s career prospects (and, therefore, your earning potential) we wanted to offer some practical tips about the financial costs of university:
Is going to university still worth it?
Only you will truly know whether attending university is personally right for you. From a financial point of view, however, we can offer some suggestions to help you decide if it is worth 3+ years of your time.
There is some evidence to suggest that those with an undergraduate degree are paid more than those without one. However, the picture is not completely clear-cut.
The statistics point to certain university degrees offer a higher earning potential than others.
The institution you attend also has a big impact but surely it is more important to find the best university for your child, than just simply the best university
Historical statistics point out that female graduates are also more likely to see a bigger financial benefit from university compared to men. Women with a degree are estimated to earn 28% more than those without. For men with degrees, their earnings are about 8% higher compared to their non-degree counterparts.
Mixed in with all of this, of course, are the costs of going to university. In other words, even if your earning potential is higher with a university degree, is the up-front investment and subsequent debt you need to pay worth it (from a financial perspective)?
You will need to sit down and do some sums for your own particular situation, but here are some suggestions as a general guide.
Firstly, and importantly, remember that you do not start paying back your student loan until you start earning. For instance, if you start a university degree this coming September (2019) then you will only start paying back your loan once you start earning over £25,000 per year. You will then have to pay back 9% of your earnings over this amount.
But do remember that your student debt is wiped after 30 years after you started paying it back. So, if you start repaying it from the age of 25 you will no longer have to do so once you reach age 56.
So, it looks like you should not pay your student loan back early as the debt will eventually be wiped anyway. Try to think of the monthly payments as a kind of “graduate tax” which you pay for having attended university.
In our view, attending university still makes a lot of sense from a financial point of view – despite the student loan repayments you will have to make.
However, this does not mean university is right for everyone. Nor does it mean that there are no other options available to you which could offer even higher earning possibilities or fulfil your life’s ambitions
How much money do I need for university?
There are many factors involved with answering this question, including where in the country you will live whilst you study as well as the length of your course.
You already know that you will be facing tuition fees of up to £9,250 per year if you are a British student studying in England. However, you only start paying that back later – so set this aside in your mind for now. We are concerned with how much/if you need to save beforehand in order to live comfortably whilst at university.
Your main living cost whilst you study will be your rent. When we looked in 2017 it averaged at £125 per week – or £4,875 a year on a 39-week contract. Certain locations such as London, however, present higher rent costs.
Essentially, we are suggesting that parents have honest discussions with their child and more importantly, incorporate it into your family long term financial planning.
If you would like us to help you with this, please do get in touch.