Categories
Savings

How much Money Should I have for Emergencies?

There are many people that like to have some money tucked away for emergencies. It is a good idea to have a think about the advantages of doing this. There are many possibilities such as having money to replace something that breaks, to pay an unexpected bill or to cover costs if you lose your job. These things cost quite different amounts of money and so it can be tricky to know exactly how much you should have put away for emergencies.

A few Hundred Pounds

It can be worth putting a few hundred pounds behind you if you can. This will allow you to have enough to pay for an unexpected bill or to replace a white good that breaks with something cheap or second hand. This should be a bare minimum amount as if you have two expenses at once you will not have enough. However, this can be a good amount to aim for to start with so that you have a bit there. But you may want to try to make it even more if you can.

A Few Thousand Pounds

This amount of money will allow you to feel a lot more secure. It means that if you have an insurance renewal you can pay it yearly instead of monthly or if white goods need replacing you will be able to buy quality one. It will be important though, to make sure that as you spend money from your savings, you replace it as you can afford to. Then you will be able to use them again if you need to in the future.

Six Months Outgoings

Some people like the idea of having six months worth of outgoings available in their savings in case they lose their job. This will enable them to take their time looking for something and finding the right job and not feel pressured into getting the first thing they come across which might not be totally suitable for them. It also means that if there are not many jobs around, they will be able to wait until there is a but more to choose from. It can really help you to feel like work is not so bad, if you know that you have an option to leave, because you have the money behind you so that you can still cover all of your bills if you do walk out or hand your notice in.

As Much as Possible

If you can continuously add to your savings, then this can be useful. It means that you will be able to build up that stash of money and you will be able to cope if you are out of work long term, have a selection of emergencies or just want to dig in a treat yourself to something like building work on your home. It can be worth thinking about whether you want to set up a transfer each month to save some money so that you are always adding to that account and making sure that your saving increase or that they are replenished when you spend them.

If you are working hard on building up savings do make sure you put them in an account with a decent interest rate. You want to make sure that you are getting as much as you can as it will be a bit of free money for you. The accumulated interest, will then get interest paid on it, which is called compound interest and it can make a big difference to how much interest you get, especially over the long term.

Categories
Pensions

How to Pick the Best Pension

There are many of us that do not have a pension, or only have a government pension and might be thinking about getting one. There are lots of companies out there that offer pensions and it can be difficult to know what to do when it comes to buying the pension. It is good to consider it for a while as it could make a big impact on your retirement. It is worth thinking about the fact that we could be retired a long time and once we retire, it may be hard for us to earn extra money so we will be relying on our pension as an income. This is why it is so important to make sure that you make the right decision.

Government Pension

The government pension does not pay a huge income, but it is worth doing. For the amount of money that you have to pay in, you will find that you will get a lot out. If you are employed then you will be paying in through your PAYE but if you have not always been employed full time or you are self employed then you may not have paid enough in. If you do a self assessment tax return you can make voluntary contributions to your pension even if you do not earn enough to have to pay in and it can be a good idea to do this. You can do one of these tax returns even if you are employed not self-employed and you should be able to volunteer to make the payments. You can check first online on gov.uk to see how much you have already paid in and how many years you need to pay in to qualify for a full pension from the government.

Company Pension

If you have a job, then your company may allow you to use their pension scheme. Companies that have more than a few employees have to make a pension scheme available for their staff. This means that there is likely to be one that you can join. If you are not a full-time employee you may not be able to join it, but it is worth enquiring anyway. The big advantage of a company pension is that the company will normally pay in some money as well. This means that your pension pot will be a lot bigger compared to the size it would be if you were the only person that was paying in to it. This means that you will potentially get bigger payments when you retire.

Personal Pension

A personal pension will not have the advantage that a company pension does of the employer being able to pay into it. However, it does enable you to regularly put money away for retirement. You will have to pay in a certain amount each month so it will force you to do that. This will mean that you will not be in the situation where you struggle to remember to put money away for retirement or that you retire and do not have any pension due to you.

Other Options

Some people do not like the idea of pensions though. They are not keen on the idea that they are paying in a lot of money during their lifetime and if they have a very short retirement they will not benefit from it for long. It can be the case that if your spouse outlives you, they will be able to have a portion of pension paid to them. However, if neither of you claim for long, you may have paid in far more than you get out. Therefore, some people may prefer to put their money into other things, so if they do not use it in retirement, their children will inherit the lump sum and they will be able to use it instead.

Categories
Investing

Should I be Investing Money?

It can be hard to know whether we are always doing the right thing with our money. At the moment, for example, savings accounts are paying really low interest and so you might be thinking that perhaps you should be investing instead. This can be quite a temptation when we hear about the money that some people make. However, it is worth making sure that you have a full understanding of how investments work before you start investing.

What is Investing?

When we invest money, we actually buy something which we hope will increase in price. So, this could be shares in a company, for example and we hope the company will increase in value and therefore their shares will go up in value as well. It might be that we buy some antiques or art which will hope will go up in price. Some people buy a second home and rent it out and hope that when they sell it, it will be worth more money than when they bought it. Often with an investment, the value of the item is prone to going up and down.

What are the Advantages Over Saving?

Often the return on an investment is better than saving. For example, it can be possible to get an average of 8-12% a year on some investments but when you have savings you are more likely, at the moment, to get from 0-2% a year. It is obvious then, that there is a big advantage in that you have the capability of making a lot more money when you invest money compared to when you save it.

What are the Disadvantages Over Saving?

There are a lot of disadvantages to investing, but it is a good idea to think about I in terms of the amount of gain you could possibly make. Firstly, you will normally need quite a lot of money to start with. You cannot buy a house, with a small amount of money or even art or probably even many shares, so if you do not have a lot of money to invest then you may find that it is not an option for you.

There is also the risk that the investment will go down in value. The prices of the things people invest in do fluctuate up and down and so this is not unusual. However, this means that a lot of people will keep their investments for a significant period of time so that know that they are more likely to go up, rather than down in value. This is because over time the small price fluctuations will be filtered out. However, there is still a risk that the value may fall and it will depend on the type of thing that you invest in as to how high that risk it. This means that there are a lot of people that will only invest money that they can afford to lose and will use a financial advisor that can pick them an investment that will suit the risk level that they have. It is worth noting that it is generally the riskier investments that are more likely to pay out more money compared with the lower risk ones that are likely to bring the lower returns. You will need to think about what risk you are prepared to take.

Lastly, you will have to pay capital gains tax when you sell your investment if it has increased in value over a certain amount. You will also have to pay tax on any income you get form the item. Such as rent if you buy a second home or dividends if you have shares, so you will need to consider that as well.

Categories
Advice

How to Teach Teenagers about Money

If you have teenage children then you may realise how tricky it can be to teach them about anything. They can often think they know better than anyone else and often their parents are the last people that they want to take advice from.  However, it is really important that they have a good understanding of money and therefore it is good to teach them about it if you can. There are methods that you can try to use which might be handy though.

Buy Them a Book

It could be easier to buy them a book, rather than trying to talk to them about money. Some children are more likely to read a book than others. If you think they will be unlikely to read it then perhaps direct them to a website instead. There are books aimed at children at this age, such as finance textbooks or there are slightly more fun books about teenage millionaires etc. Anything that can get them thinking about money and how to make wise decisions with money can be useful.

Open Them a Bank Account

If they have not already got a bank account then open one for them. Younger teenagers will only be able to have kids’ savers accounts but older ones may be able to have a current account. It can be a good opportunity to talk to them about interest and the difference between different types of savings accounts as well as what they might pay in interest. Having an account may help to encourage them to save some money and they will learn about interest as well. You may be able to expand the discussion a bit too and chat to them about loans, budgeting etc as well.

Give Them Pocket Money with Conditions

Pocket money can be an opportunity to teach them how to budget their money. For example, you could give them pocket money but state that they can only have it if they buy all of their own clothes. Obviously, you would need to give them enough to cover this cost. This will allow them to think about how much clothes cost, what they need and how they will have to spend carefully to make sure that they have enough for everything that they need to buy. Make it clear that you will not help out. If they are at school, it could be wise for parents to buy the school uniform as this is something that they will have to have.

Try to Sell Them the Benefits of Good Money Management

Talking can be really useful and perhaps starting off a conversation in a way that can draw them in will be helpful. Perhaps mentioning how you could become a millionaire by just saving a bit of money each month which might make them interested. It can be harder if they are not money motivated but you might be able to work it in to something they are interested in. It is worth trying to think of a way to get them interested and you may perhaps need to try lots of different techniques to find one that will work.

Teenagers may learn a bit about money in school, which is more than most parents will have had, education wise. However, it may not be enough to get them really thinking about money. It can be great to try to make sure that you get them talking about it and try to teach them things. It is not always easy to engage with them but it is well worth trying different things to see what works.

Categories
Budgeting

How to Learn to Drive on a Budget

Learning to drive is a skill which can be extremely handy. Not only can it make life more convenient, it can also open up various jobs to you. It can be very difficult or perhaps even impossible to reach some locations on public transport and so driving might be your only option. However, learning to drive can be really expensive. There are things that you can do that will help to reduce the cost though.

Buy a Batch of Lessons

With some driving schools you will be able to get a reduction if you buy a batch of lessons. It is a good idea to look out for these but also contact independent instructors and see how they compare. Ask around too and see what others think. There may be people you know that have recently had lessons who may be able to recommend someone. It is wise to make sure that you think about value for money as well though as you do not want to end up paying a very small amount and finding that you will not get a very good teacher or get someone that does not teach you everything that you want to know. Of course, to be able to afford to do this you will need a lot of money. It can therefore be wise to delay learning to drive until you have saved up the money that you need. Then you will be able to afford to do it this way and hopefully you will be able to pass your test pretty quickly.

Do your Theory Test Early

It is well worth booking in your theory test really early, even perhaps before you take any lessons. You have to pass this before you can book a driving test and so if you do it and do not pass, you may have to delay your test. This could mean paying for more lessons and therefore you could end up paying more. Also try your hardest to revise really hard so you are confident going in to the theory test as if you fail you will have to pay to take it again, which will cost you even more.

Find a Friend of Family Member to Teach You

It can be handy to find someone you know to teach you. It is a good idea to ask around friends and family to see if someone will volunteer. If you can get some practice without paying (or perhaps just paying for fuel) this will help in most cases. If course, you need to make sure that you do not get into bad driving habits because they do not teach you correctly. Therefore, it can be handy to either just drive and ask them not to help you or to pick someone that has fairly recently passed their test so they can remember what you need to do. You may need to ignore instruction form some people as they may just insist on giving it to you anyway!

Keep Lessons Close Together

It is a really good idea to keep your lessons close together. This is because you may forget things between lessons. So, if you can get lots of practice then this will help. It is wise to have at least two driving lessons a week and then you should not need to have so many compared with if you have one a fortnight, for example. Even if some of those are with friends and family, rather than an instructor, it should all help you to be able to stay in practice and be able to take your test more quickly.