Put your money away and watch it grow

by Ryan on May 28, 2013

Money - SavingsWhat is it about human nature that makes us seek quick solutions? Large complex problems, you know the ones that span our entire lifetimes somehow seem like they can be solved if we just found that magic opportunity, or that magic investment choice. While solving long term retirement needs can’t be solved overnight, setting up a plan that will create a stable financial future can.

One other shining light is the fact that Millennials (those born between the early 1980s and early 2000s) are better savers than the previous generation. That’s because “they saw their parents take such financial setbacks during the crisis and the subsequent recession.” states Mellody Hobson, president of Ariel Investments in a recent WSJ article.  Longer lives, less stable careers, the lessons from the downturn all have shown that savings whether for retirement or emergencies matters…. a lot.

Longer term planning through regular savings not only helps secure a retirement but also smooths over life hiccup’s. We are relearning how to do it now, but what about where to save?

Did you know that  in the UK you can take out an ISA (everyone over 16) with an allowance of £5,760 to save tax-free, each tax year?

With normal savings, basic rate taxpayers can be taxed up to 20% on the interest, higher rate taxpayers up to 40%, – but in an ISA, is tax free.

There are a few misconceptions with cash ISA’s though and let’s chat about a few here:

1. You get a new cash ISA allowance each year, but if you don’t use it you lose it.
2. Money withdrawn does not lose tax benefits but you cannot return it.
3. You can transfer between ISA without losing your benefits

Of course chat with your bank or financial advisor when setting up an ISA (look for BM Savings which tends to have good rates) but the trends (or should I say even relearning) of regular slow financial prudence is very encouraging news.

{ 1 comment }

Kari July 12, 2013 at 8:10 am

My parents got my young 15 year old brother a ISA account to start saving his money in. It wasn’t so much to teach him that ‘saving is good’. But to teach that savings can create wealth, not just exist as wealth on their own. They can pay interest, money you already have, in the bank, earning interest instead of without, where inflation eroding away its value over time.

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