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MONEY TALKS

Everything you need to know about money

It’s easy to feel freaked out by money, but getting on top of your finances doesn’t have to be scary.

Searching for the best savings accounts or mortgage rates among the sea of products out there can be overwhelming, and it’s probably not surprising that 57% of us don’t even know how much is in our bank account.*

It's never too late to start saving
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It's never too late to start saving

But help is at hand, as our guide helps break down exactly what to do with your money at every stage of your life – and it’s never too late to start making smarter financial moves.  

Kick-start your kids’ savings

When planning for a child’s future, even small amounts can make a big difference.

Emily Young, financial advisor at Lycetts, says the best way to save is by opening a Junior ISA, in which you can invest up to £4,368 each year, tax-free.** 

TSB’s Junior ISA has an interest rate of 3.25% and Halifax gives 3%, while Santander offers 3.25% if you already bank with them. 

Clever budgeting can be a life saver later in life
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Clever budgeting can be a life saver later in life

“Junior ISAs mean parents can set their child up for a good financial start to life,”Emily explains.

“If started at birth and contributed to regularly, these funds can build up to a significant amount over the years.”

For example, putting in £20 a month from birth could add up to £5,800 by the time they’re 18, based on an interest rate of 3%. 

And these tax-efficient savings accounts can’t be dipped into until the child turns 18. 

While children can open their first current account from the age of 11, they can’t open an adult ISA until they hit 16 – however, from then they can pay in up to £20,000 per year, paving the way for regular saving as an adult. 

And a junior account will be rolled into an adult ISA at 18.

“From a practical point of view, getting a child into the habit of saving early takes a lot of the fear out of finances,” explains Emily.

Pay it by Direct Debit, so you don’t miss a payment

Steven Bates

“This means they’re more likely to take a sensible approach to money as they get older.” 

Don’t panic! If you’ve yet to start saving for your children, Steven Bates, Practice Principal at Giraffe Financial, advises putting a Junior ISA in place ASAP. 

Saving £10 a month is a good start and you could set up a Direct Debit to transfer the money just after pay day.

The Money Advice Service says that if you put away £10 a month into a basic kids’ savings account with an interest rate of 2%, over the course of 18 years you could accumulate over £2,500. 

Start Taking control from your 20s.

Adulthood brings with it the reality of financial responsibility, from paying bills to buying a car.

At the root of borrowing any money is your credit score, which is a financial rating telling a lender whether you are likely to pay back borrowed cash. 

A bad credit history is a common issue, and could stem from something as simple as missing a credit card payment. 

Getting a good credit score is important as you hit 18, according to Steven, as it’s needed for everything from getting a phone contract to securing a mortgage.

“A strong credit score across credit reference agencies Experian, Equifax and Call Credit is an essential start to a successful financial life,” he explains.

One way to kick-start this is by taking out a small and manageable mobile phone contract. 

“Pay it by Direct Debit, so you don’t miss a payment,” says Steven. “If you do this alongside receiving a regular wage, your credit score should remain high throughout your adult life, which will make it easier to apply for your first car finance and mortgage.”

You're never too young to start saving for your pension
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You're never too young to start saving for your pension

The same goes for credit cards – although be careful that you have the means to pay them back before you use them.

According to Steven, a credit card can be useful in increasing your credit score, so consider applying for a card that has 0% interest and using it to pay for small purchases only when you have the funds to settle these amounts in full. 

You should also make sure you’re registered on the electoral roll, so lenders can easily confirm your name and address when applying for credit of any kind.

Don’t panic! If you’re concerned about your credit score, you’re entitled to a free report every 12 months from Experian or Equifax.

Checking your credit score won’t affect it, but multiple enquiries from various lenders such as mortgage companies can. 

If you find you have a low credit score, first make sure you don’t have any outstanding debt, such as an unpaid bill or parking ticket. 

Then set up all your outgoings to be paid by Direct Debit just after your salary hits your account each month.

Building up a nest egg in your 30s

As the current State Pension of £164.35 per week (that’s just £8,546.20 per year) isn’t going to cut it for most people once you hit your autumn years, it’s important to have a pension. 

Ideally, we should all start saving into one in our 20s, but the reality is many people only start in their 30s. 

However, YouGov’s Bridging the Young Adults Pension gap report found that 22% of 35-54 year olds have no pension at all.

If you’re in permanent employment, your employer is obliged to automatically enrol you into a private pension scheme and, if you contribute 5% of your wage, they will add a minimum of 3% on top.

“You can always opt out of your workplace pension, if you need to take a temporary break for financial reasons,” Steven explains. 

“However, look into the packages your company offers, as sometimes if you pay more into it than the standard 5% your employer’s contribution may also increase.”

If something sounds too good to be true, it usually is

Steven Bates

Alternatively, if you have your own business or are self-employed, David Cook, managing partner of Northern Spire financial services company, suggests you speak with a pension professional, as you won’t have the same company benefits that employees do.

Another milestone – and probably the biggest financial challenge you’ll face – is getting on the property ladder. 

Steven recommends prioritising saving for your first home over other big expenses such as weddings or cars. 

“It will be your most sensible financial move,” he points out. Steven adds that a Lifetime ISA is a great tool for first-time buyers. 

These can be opened between the ages of 18 and 39, and you can put £4,000 in per year up to the age of 50. 

The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year, although you can only withdraw money when you buy your first home, are aged 60 or over or are terminally ill. 

The best interest rate out there at the moment is the Moneybox Lifetime ISA, which offers 1.4% interest AER, while Nottingham Building Society offers 1.25% AER.

Research the different mortgage offers and rates available before making a decision
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Research the different mortgage offers and rates available before making a decisionCredit: Getty - Contributor

Independent financial adviser Kathryn Turner says there are other changes you could also consider making if saving to buy a property. 

“For example, you could downsize your current rental property or house share, so you pay less rent.”

Steven also advises keeping a back-up pot of money when you do buy a house, so that a failed MOT or a broken boiler don’t leave you in dire straits and unable to pay the bills. 

Don’t panic! Some lenders offer first-time buyer mortgages, specifically to help you get a leg up. 

This type of deal often includes incentives such as cash-back and a lower deposit. 

Also 95% mortgages are becoming readily available again, meaning you only need a 5% deposit.

Future-proofing mid and later-life finances

As you head into your 50s and beyond, Steven suggests you should aim to have four assets in place for a stable financial future.

“For example, pension, property, ISAs and stocks and shares,” he says.

David adds: “As you get older your greatest risk is inflation, which will erode the value of your cash. 

"So look at ways of investing money with a return greater than inflation, such as in stocks, shares and corporate bonds as, unfortunately, it’s unlikely that a savings account alone will do this with interest rates currently so low. 

"Make sure you seek professional advice first, however.” 

There is no minimum amount to invest in stocks and shares, and it’s another case of how much you can realistically afford and being aware of the risks. 

You can even get apps on your phone for trading, such as Interactive Investor (free on App Store).

Emily says you also need to review your finances annually, being sure not to put too many in one place, so you spread the risk in case one area of the market fails.

Debt charities such as StepChange can help you if you've got into debt
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Debt charities such as StepChange can help you if you've got into debt Credit: Getty - Contributor

The main thing to remember is to avoid all schemes that are not regulated by the Financial Conduct Authority, such as unregulated investment opportunities.

“As a general rule,” Steven says, “if something sounds too good to be true, it usually is.”

Finally, David says everyone should also have a will in place. 

“As we are all living a lot longer it’s important to look at lasting powers of attorneys and choose a person to make decisions on your behalf if and when you’re unable to,” he says.

He recommends using a STEP (Society of Trust and Estate Practitioners Association) qualified solicitor. 

“They are specifically trained to give the best advice and know all the rules and regulations,” he explains. 

“It might feel a bit maudlin, but not having a will leaves chaos for those left behind.”

Don’t panic! If you haven’t yet set up a pension or started saving, you can still secure money for retirement. 

By putting a pension in place now, there’s still opportunity for you to accrue a sizeable amount per month – better late than never. 

For example, if you’re 50 and start saving £100 per month, based on an interest rate of 5%, you could build up £22,000 by retirement at 67.

Alternatively, stretching yourself to putting £250 a month aside would mean a potential pension pot of £55,000.

‘I finally bought my first house aged 52’

Buying a house can be wise investment for your money
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Buying a house can be wise investment for your money Credit: Getty - Contributor

Jane Carson, 59, a writer and film maker, lives in London with her seven-year-old daughter and her partner, 50.

“As I’m self-employed, my income has always been erratic. 

I don’t have a wage that I can rely on and payments aren’t regular, which made it hard to save when I was younger.

I rented in London in my 20s and stayed in the same block of flats for 30 years as the rent was cheap. 

When I met my partner and we decided to look for a bigger place, we realised that rents had rocketed in the area, so buying seemed like a wise option.

We tried to save up a deposit, but that felt impossible, especially when our daughter was born in 2012 and finances grew even tighter as I didn’t get any maternity leave as I was working as a freelancer.

In the end, we managed to buy a dilapidated house to renovate in 2013, after my dad passed away and left me some money that I put towards the deposit.

However, the bank initially made it tricky for us to get a joint mortgage as I was 52 and only 15 years away from the state pension age at that time. 

After much searching though, we finally found a mortgage provider willing to help us.

But it’s not been easy, as the house renovations have cost tens of thousands of pounds. 

I was only able to afford that when my mum helped me out with money.

I’m so glad now that we have our own place for my daughter to grow up in, without worrying about rent hikes or having to move out at a landlord’s say-so. 

If I hadn’t inherited that money, I would have been stuck renting forever.”

‘I started saving at five’

Rochelle used her savings to start her own business
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Rochelle used her savings to start her own business

Rochelle White, 33, owns her own PR firm and lives in Milton Keynes.

“My parents opened a Halifax kid’s account for me when I was five, and I’ve been saving ever since. 

Birthday and Christmas cash would be invested into it and by 18, I’d saved £4,520.

Studying fashion and events and working part-time, I lived at home and was careful with my student loan – I always knew what was in my account and I’d save as much as I could, whether it was £20 or £50.

This meant I was able to set up my own PR business at 30, using my savings of £6,000. 

Right now, across two accounts, I save around £200-300 per month and this has built up to a total of £14,000. 

I’m saving to buy my first house, but that balance does dip from time to time with any extra business costs.

I also keep a money pot to save any excess change – whether that’s 1p or a fiver, then when it’s full I’ll put all the cash into my house fund.

Feeling secure in my finances means I know where the money I make is going, which gives me freedom and opportunity.”

‘I was left with £12,000 of debt’

Sarah is finally debt free after eight years
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Sarah is finally debt free after eight years

Customer sales representative Sarah Pepper, 39, lives in Ashby de la Zouch, Leicestershire, with her nine-year-old son, 19-month-old daughter and fiancé Dan, 38.

“Working full-time as an admin assistant from the age of 20, I fell into the trap of putting holidays and nights out on credit cards when I couldn’t afford them. 

My then-boyfriend began ‘borrowing’ hundreds of pounds from me which he failed to pay back. 

Relying on credit cards, personal loans and overdrafts, I was constantly juggling payments from one to the other, leaving me feeling lost, stressed and alone. 

By the time my son was born in 2011, I couldn’t keep up with any repayments. 

Living hand-to-mouth, I felt ashamed and couldn’t face telling my family why I was in debt. 

My son was eight months old when I finally contacted debt charity StepChange.

Together we worked out my total debt was £12,000. 

Speaking to them gave me the courage to open up to my parents, who have been amazingly supportive.

It took eight years to repay my debts with StepChange’s debt-management plan, but it cost £80 less per month than the previous minimum payments I couldn’t afford. 

I finally cleared my debt last November and I can’t thank StepChange enough. 

My credit score was affected, but over the past year it has improved substantially, meaning I will be able to borrow again for a house in the future.

Now I’m debt-free and in a more financially stable situation. 

Dan and I organise our finances using a budget and track all incomings and outgoings. 

My next goal is a mortgage and we are on a steady and sensible path to reaching it.”