With tough economic times ahead, managing your money properly is more important than ever. We all have the duty to ourselves and our families to effectively manage our money to ensure future wellbeing; having an effective savings strategy is therefore paramount.
An effective savings strategy should ensure that you always have access to money in case of emergency as well as in the future should you need it. There are a number of intelligent saving methods that we aim to cover in this article.
A Cash ISA is a type of savings account that you can easily set-up at your bank or building society. You will receive interest based on the amount invested. The main benefit of Cash ISAs is that they are tax free, unlike regular accounts where you will be taxed on interest. If you occupy the high end of the tax payer bracket, cash ISAs are a great investment for the long term, allowing you to save for the future or for a large investment. To demonstrate, a cash ISA with a 6% annual equivalent rate would require a regular saving account offering 7.5% to be beaten, and a staggering 10% for those in the top tax bracket.
Stocks and shares ISA packages
A Stocks and shares ISA is a great way of putting money into a range of investments without having to pay tax on the profits made. Share-based investments are ‘ISA-able’, meaning you can put your shares into investment trusts. The advantage of using a stocks and shares ISA is that any profits from share price increases won’t be counted by capital gains tax and you will be able to reclaim any tax on the bonds you have. While stocks and share packages do offer sound investment, there is always a chance you will end up with less than you started with as share prices can drop.
SIPP stands for self invested personal pension and is a form of personal pension plan. SIPP works in the same way as a regular pension but allows for more flexibility in terms of investment. Traditional pensions allow payments to be made to an insurance company, offering little choice on how the money is used. SIPPs are more flexible in the sense that you can control how it is invested through the use of a fund manager or stockbroker.
Saving for the future is becoming more and more necessary as governments remove more and more benefits for the elderly. With the ever rising cost of care, having an effective saving plan will be invaluable in the future.