Personal Savings – It’s personal

A guest article by Victor Sacks, IFA from VS Associates.

Personal savings – is just that, it’s personal.

Against the backdrop of rising inflation/energy prices, you could be forgiven in thinking that this must be a belated April fool, after all, who has any money left over and the end of each to save?!

But let’s assume, that after swelling the coffers of HMRC with your hard-earned tax dosh there is a smidge left over that happens to be surplus to requirements. 

First and foremost, please don’t take this as advice. I have no idea of your personal circumstances so I can’t comment to the relevance each of the following has on you. So just imagine I’m a virtual fella in your local!

The first question I’d ask, is what are you saving for? As that dictates the options available in my opinion.

“I have no emergency savings, if the boiler went, I’d have to use my credit card”

Not an uncommon situation and an answer I’ve heard on many occasion – my answer is to head over to a comparison website, see who’s paying the best rate of interest and start diverting 5% of your income into it and look to build up a savings pot of around 3 months’ income. That’s rule one, step one, first base. This could be a Cash ISA or other savings/bank account

“I want to start saving for my tax/other event I’ll need to pay in 12 months’ time”

Once again, it’s over to the comparison website. Again, possible Cash ISA or similar. There are accounts that offer a slightly higher interest rate, if you limit the amount of withdrawals made, which as you want to save for a year is perfect. Shun the ATM card and start saving around 10% of your income. You can then increase to 20% as you start to get used to the idea of saving and you can also see that savings account start to increase in value.

“I’ve got my emergency fund and tax savings sorted – now I want to save for a few years or special event (Kids education/property purchase/wedding/Barmitzvah* (* delete as applicable)”

Once we reach a position where we can save for at least 5 years before we need access, the idea of ‘investing’ in my opinion comes into view. Less than five years and it becomes more about timing the market and that is very difficult to do and even Buffett gets in wrong short term, but he has built up enough reserves than he can afford to take a punt. Allow me to use an analogy. Those massive trees in your local park…when they were growing were they dug up and moved around each time the weather shifted? Or did they just stay there, getting water and sunshine as it came along…. It’s more about time in the market so hence a minimum of 5 years as far as I’m concerned. 

There are currently around 4,500 investment funds, authorised and regulated by the Financial Conduct Authority (FCA) meaning if they ever went bust, you would be protected by the Financial Services Compensation Scheme (FSCS). So there is a lot of choice and really no need to look at unauthorised investments (those adverts offering 7% pa normally found when you scroll Social Media) for this. Individual Savings Accounts also come as Investment ISA’s as well as Cash ISA’s (described earlier) so why not take advantage of tax efficient growth potential, no liability to income or capital gains on the growth when you encash. You also have a £20,000 annual allowance, as does your spouse or anyone over 18 living in your household. Junior ISA’s are available to those under 18 and they have a £9,000 annual allowance. So for 2 adults and two children in a house that’s a whopping £58,000 you can save each tax year, tax free in your hands. Where to invest? Ah…that’s the advice piece, suffice to say, I can’t cross that Rubicon here, but there are many self invest platforms out there that will offer some guidance, but not the advice.

For those only interested in cash based investments, National Savings Premium Bonds have a prize pot roughly equivalent to 1% with a maximum investment allowed of £50,000 per person, or their Green Bonds which allow up to £100,000 earning 1.30%  gross over a 3yr period (Issue 2), however, if you’re not fussed by ‘Green’ currently (at the time of writing this on the 5th May 2022) Chase are offering 1.5% AER for their easy access account, Shawbrook are paying 1.96% for a one year fixed and Smartsave are paying 2.21% and 2.29% for a two and three year fixed account respectively (data taken from other comparison sites are available.)

“What about Bitcoin and other Cryptocurrencies?”

I’m not adverse to any of my clients getting involved and have even bought a few hundred pounds worth myself to see what it’s like. I have treated it like a bet, only gambling what I feel comfortable losing. yes, I class it as a gamble not an investment. I’ve seen my few hundred become a few thousand before going back to a few hundred-within 12 days. There isn’t an investment fund that behaves in the same way.

“I have questions”

Feel free to email me: [email protected]

VS Associates Ltd is an appointed representative of Sense Network Ltd, which is authorised and regulated by the Financial Conduct Authority.

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