Monthly Archives: January 2016

A brief introduction to ISAs

‘If you’ve got any savings… you should have an ISA’

This is the statement made in the ISA guide across at Money Saving Expert, although I’m not sure I totally agree with it.

In theory it makes a lot of sense. As part of our series on Savings we’ve looked in general at the reasons behind saving and three top techniques for doing this. Now let’s look at the benefits of having an Individual Savings Account, in particular cash ISAs.

The main advantage of having a cash ISA

The most significant advantage of ISAs is that they are tax-free. Normally as a basic rate taxpayer you’ll lose 20% of your savings interest to the taxman.  For every £100 you’ve put away, you lose £20. On a higher rate, this figure is 40%.

This is ridiculous – especially when you consider how very few savings accounts don’t pay more than 1.50% interest per year (pre-tax of course!). You earn little, but lose a lot.

By having a cash ISA, all interest earned on savings is interest kept in savings.

How this works is expressed in some great cake symbolism over on the Money Saving Expert page given at the top of this article – check it out!

Do remember, though, that there is a limit on how much you can save each year. As of now (January 2016), your allowance is just over £15,000. On a junior account it’s around £4,000.

In addition to this fact is also that any of this annual allowance you don’t use will be lost forever. Unused allowance isn’t carried over. If you’ve only used £10,000 of your 2015-16 allowance, you won’t then get £20,000 or so in your 2016-17 allowance. So use it or lose it people.

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East Access ISAs do exist

If you’re worried about locking your money away, easy access ISAs are available. If you think you might need to withdraw cash for emergencies or an impromptu holiday, fear not!

But do take care – anything you put into your annual ISA allowance takes away from your annual allowance, even if the money is later withdrawn. If you pay in £14,000 but then remove £1,000, the total amount of allowance used up is still £14,000 – even though only £13,000 now exists in the account.

This might not be a problem for you, but if you’ll manage to save another £2,000 or more before the end of the tax year, you can’t put it all into your ISA. You simply won’t have the allowance left…

However…

ISAs might be a bit too troublesome for you. If you’re wanting easy access, as outlined above, withdrawals will affect your annual allowance.

If you’re not bothered about easy access, then you enter the realms of locking your money away in return for higher interest rates, but you need to be certain you won’t need it, otherwise you risk penalties for accessing it (no bank can stop you withdrawing your own money).

For simplicity and more short-term solutions, you can keep a relatively regular check on your money and basically exploit easy access savings accounts, many of which are accessible online. Some are even online-only offers, like my Tesco Internet Saver.

On the flip side to this, ISA interest rates are long-term, whereas other savings accounts are often finite.

The same goes for current accounts. Some offer far greater interest rates than ISAs, with earnings even higher after tax than what an ISA would give you tax-free! However, these top accounts generally expect to be used as your main account. So they may require you to set up two or more monthly direct debits, and you might not want to.

Why I disagree with Money Saving Expert’s statement on ISAs

In short – I think ISAs are great once you have a larger sum of money, and once you’re more financially secure. They keep your savings safe and whole from the reaches of the taxman.

Furthermore, if you can take out a fixed term cash ISA of two, five or even more years, you reap even greater rewards in relation to other saving accounts.

Nonetheless, if you’re just starting out saving I believe you’re better using an easy access saver with online facilities so you can check it on a regular basis and add and deduct £££s when needed.

Oh, and if you’re under 16 and eager to start saving something, you can’t own an ISA anyway. 16+ only I’m afraid

But do read up online, definitely check out the MSE ISA guide here, and make up your own mind. And let me know what your thoughts are on this matter!

One last little thing…

If you, like me, are looking into moving home soon, perhaps purchasing your first property, take a look at the British government’s Help to Buy ISA. For every £200 you save, the government will give £50, up to a maximum bonus of £3,000.

Making A Garden by Carol Klein

‘Our gardens may be cultivated places but each of them is comparable to a wild habitat. By looking at the wild environments that most closely resemble our own plots we can obtain much of the basic information we need to get gardening’ (p.7)

Thus begins Making A Garden: Successful Gardening by Nature’s Rules, written by one of the nation’s most cherished gardeners and TV presenters Carol Klein, a woman of such boundless enthusiasm for nature that you feel you are there in the garden with her.

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I bought this latest book, published only this September, based on my love of her previous works (most notably 2011’s Life in a Cottage Garden, which I still dip into whenever I feel the biting of the horticultural bug, having no garden of my own at the moment). I find Carol’s writing inspirational and aspirational yet familiar all at the same time.

That said, I have some reservations about this latest offering, although the positives ultimately outweight these.

Plus points

As ever, the book’s most instantly striking feature is the fantastic photography by Jonathan Buckley, whose work with other gardeners is a firm favourite with me too. However, coupled with Carol’s brilliantly poetic captions and pointers, you can’t fail to be enchanted.

Like the photos, the words focus primarily on native species or plants that enjoy our indigenous conditions, and the two carry forward the main underlying message of focusing on your local situation and working from there through the entire book.

The “theory”, as it were, of this message is underpinned by regular wanders into areas of Carol’s Glebe Cottage garden to visit the seaside section or the raised meadow beds by the gypsy caravan, giving substance to the imagery around it. We are told what she herself grows in each situation and how she fostered that environment if not native so we could work towards it ourselves.

The book is clearly divided into six chapters concentrated on a particular habitat: woodland, seaside, exposed, hedgerow, wetland and meadow. This makes it a lot easier to flick through after that initial read when (or if!) you have a clear idea what you are working with or what you would like to achieve.

Each chapter moves from the more general insights, hints and pointers on the environment into wonderful case studies, some more public spaces, some private gardens. It is always useful as well as a joy to see how the land unfolds around the house, incorporating its structure, rather than the garden being an isolated concept.

Following these case studies come short inventories of plants best suited to the particular situation, so we have Eryngium maritimum (sea holly) in the Seaside plant directory and Vinca major (greater periwinkle) in the Hedgerow plant directory. In no way exhaustive, of course, but full of great species on which to build a strong foundation at home.

As hinted at above, there are some practical tips dotted here and there throughout, such as key considerations when planning to create a pond.

Negatives

I would say firstly that this book was not quite what I was expecting when I ordered it, and for me I was let down by the title here. I imagined “making a garden” would include some sketches or watercolours, planting schemes or plans, but this is not the case. Even aerial shots of areas of Carol’s garden or of the case studies would not have gone amiss to inspire me further.

The case studies offered in each chapter are predominantly local to Carol’s home in the southwest, and those that are further from her are mostly in southern England. Wouldn’t you expect a study into British landscapes and “rules” to have been carried out over more varied regions? Granted, we Brits are extremely luck to have such a variety of landscapes in driving distance of us all.

Lastly, do not buy this book expecting anything especially groundbreaking in relation to Carol’s prior publications. This is a book full of her favourite terminology (think “Cindarella plants”). DSC_0042What makes it different is its emphasis on working with what we can find around us, whether that is our own soil types or our nearest natural spaces.

Conclusion

While this isn’t a groundbreaking book, it has all the wonderful, optimistic and inspiring elements expected of Carol Klein and I would recommend this as an excellent book of foundational ideas for those creating a garden at a new location or breathing life into an existing plot.

Overall rating: 7 out of 10

Have you read ‘Making A Garden’? Has it influenced your garden planning and planting?

How to make your savings super

‘Don’t save what is left after spending; spend what is left after saving’ – Warren Buffett (businessman, investor, philanthropist)

Wise words there. They might seem impossible to live by for many of us. After all, we have so much we have to spend on. I apply this idea differently though.

As seen in my post from 14 January, savvy saving comes from a clear plan of action, and there I offered you three plans. All hinge upon budgeting, knowing your finances well. I literally spend what is left after saving – I save as much as possible on payday morning.

For me the next question becomes how do I make the most of what I’ve saved? Or of any money I have coming in for that matter?? I’ve identified eight ways of exploiting your wealth.

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(1) Choose the best current account possible

If you’re like me, you’ve stuck with a current account you got when you were really young. Until late last year I was using a basic Halifax current account set up in the local branch with my dad’s help when I was 15 or 16. It did the job fine.

But as with most things in life, we should never settle. I came across the Halifax Reward Account while doing my banking. For paying in at least £750 a month and staying in the black, you get £5 reward the following month. That’s free income. No work involved!

Halifax also offers even more rewarding current accounts beyond what I need (they have a monthly cost rather than financial reward). Other similar accounts are out there, with different rewards, such as Natwest’s 3% cashback on household bills.

Get researching your ideal current account and don’t settle – make even your everyday banking work for you!

(2) Choose the top savings account possible

You might have more than one savings account, based on how many reasons to save you have – I have my account for the future which pays annual interest, my account to save into which accrues monthly interest before moving it on, and an account for events and annual expenses.

However many you possess, make sure you choose accounts which offer among the highest interest rates around.

For example, my future savings account has been with Tesco banking and has offered me a bonus rate of 1.40% interest in its first year. For an easy access saver in January 2015, this was amazing for me.

If you can deposit a certain amount each month, some savings accounts offer even greater annual interest rates, such as HSBC’s Regular Savers which complement HSBC current accounts (e.g. Premier) by offering between 4% and 6% interest each year.

Keep an eye open for accounts that you can manage well (some require a minimum monthly deposit which I wasn’t sure would be in my abilities every month – you might find this too).

(3) Use your annual ISA allowance

I haven’t done this so far, but hope to within the next few weeks. Us Brits are given an annual allowance of just over £15,000 which we can put into an ISA. All of this is tax-free and some accounts offer easy access.

If you don’t use up all of this allowance, the unused portion won’t be carried over into the following year, so it’s best to fill it up as much as possible. No way I’ll be able to use all £15,000 though, I’m not afraid to admit!

Be aware though that from April 2016, basic rate taxpayers can earn up to £1,000 a year of interest tax-free anyway – that’s a lot more than the majority will achieve anyway.

(4) Be prepared to switch

Loyalty no longer pays. It’s counter-intuitive for someone like me who is a fiercely faithful person. Sticking with an establishment for longer should bring greater and greater benefits, but this isn’t the case. We’re literally paid to be polygamous.

If you choose to go with the Halifax Rewards Account I mentioned in point 1 and are moving from a totally different bank, they are currently offering £100 and a chance to win £50,000. Big incentive to switch.

It also pays even if you’re not going for an instant pay-out. It pays in terms of interest rates. The account you opened three years ago might no longer be giving as much interest as it was, or another might be on offer that pays a significant amount more.

This is the case with my Tesco Internet Saver. Its 1.40% annual interest was pretty good at the time. But in the last few days this has paid out and the rate has now fallen dramatically to 0.60% gross interest. So it’s time for me to move on, and this account will be closed.

(5) Consider locking your savings away

I’ve focused on easily accessible accounts all my life, just because of my requirements and shifting situations, but if you can, why not consider locking your savings away for a set period of time?

There are fixed term ISAs out there which pay even higher interest rates on your money if locked away for 2, 3 or 5 years, for instance. Other types of savings accounts can be found too, like bonds, so remain open-minded!

(6) Consider tracker accounts

While fixed term accounts offer a set rate every year for a certain number of years, and easy access or current accounts can alter their rates to a much lower one within a short period of time, tracker accounts keep an eye on the Bank of England base rate and increase (or decrease, so be warned) depending on this.

This means that if the base rate shoots up, you could find yourself with much better interest coming in than other people in other accounts. Again, though, these accounts usually lock your money away for a particular amount of time.

(7) Put money into stocks and shares

A very viable and potentially lucrative option, but you have to be pretty patient and, additionally, have to know your stuff. Independent financial advice is often recommended.

I had shares in my name with Bradford & Bingley when I was young, but the recession hit, they went under and my shares were all lost with no compensation. You can lose it all in seconds.

Clearly the more stable the group, the more secure your stocks and shares, although none of us can ever foresee the future.

(8) Put your savings under the name of any non-taxpayers

If you are in a relationship or live with family, it’s possible to assess the tax status of your loved one.

If one of you receives less than £15,600 a year (this might have changed when you’re reading this post, so dig around a bit online) from wages and savings, then you are eligible to register as a non-taxpayer.

This individual can then hold savings and not pay any tax on them, whereas you yourself might. Yet more free income!

These are just eight ways in which you can make your savings work harder for you, with relatively little input from yourself. All you need to do is regularly make sure they’re safe and untouched, feed them frequently, and shop around every now and then. The banks are there to do the job for you really! (After all, that’s what they’re paid for)

Do you have any top tried-and-tested tips for making your money work harder for you? We’d love to read them in the comments below, so feel free to share!