Get on top of your finances by making sure you have the right accounts for your money.
It’s easy to think you just need a current account and maybe some savings, but having different types of account will help your money work harder for you. This is true for everyone, regardless of your budget or income. Check this list and if you’re missing any of these accounts, consider setting one up to start your way on the road to living a richer life.
Current account
Every bank on the high street offers current accounts, and most adults in the UK have one. But do you have the right one for your needs? For example, a reward current account costs a monthly fee in return for some extras like home and travel insurance. But if you already have separate insurance, you’re paying twice for these things! Check the policies on both and see which offers more cover.
A basic current account is available to almost everyone. It can be difficult if you have been declared bankrupt, don’t have any credit history, or no permanent address. However, HSBC and Lloyds Banking Group (Lloyds, Halifax and Bank of Scotland ) offer No Fixed Address accounts. Shelter has some great information on how to get one.
If you have a basic current account but also a regular income, you could be missing out. There are many current accounts that pay interest on your current account holdings, up to a certain amount. For example, Nationwide offers 5% interest on the first £1500 in your account.
Easy-access savings account
An easy-access savings account is ideal for the day-to-day small extras you might need to pay for. That might be to cover birthday gifts for family and friends, pay for a special night out, or to dip into if you’re a freelancer or on variable working hours and have a slow month.
Easy-access accounts don’t pay huge amounts of interest, so it’s not worth keeping ALL of your savings in them. However, they are a useful buffer account which lets you get hold of your savings if you need them without notice, often allowing instant transfer between the savings and current account (especially if they are held at the same bank).
ISA savings account
There are several different types of ISA on the market. You could have a Cash ISA, Stocks and Shares ISA, Lifetime ISA, Innovative Finance ISA, or a combination of any of them. The only rule you must stick to is that you can’t pay in more than £20,000 a year across all the ISA accounts you hold.
An ISA is a long-term savings vehicle. So, even if you can only put away £25 a month into one, you’re building a future nest egg. ISAs are tax-free, which means you don’t pay tax on any interest earned on money saved into an ISA. If you can lock your savings away for a period of time, you can get a better interest rate such as 5% over three years.
If you don’t have any ISAs, the first one to go for is a Cash ISA. This lets you save your money like a normal savings account and access it when you need to. Some accounts will require you to give notice to access the funds, so it’s not something you can dip into easily – check the small print. When you have more money to save, research the other ISA types and find out which one(s) would suit your financial habits and goals.
Credit card
Even if you’re never in debt, a credit card could be a useful tool in your financial arsenal. This is because it helps you build a credit score – it shows lenders you can be reliable with credit. In addition, a credit card can offer extra payment protections if you’re making a large purchase.
But credit cards must always be used responsibly: only spend what you can afford to pay off in full each month. This will prevent you getting into a debt spiral. The only exception here is if you opt for a Balance Transfer credit card, to consolidate your credit card debts onto one card that isn’t used for purchases.
A 0% Balance Transfer period will give you breathing space on your credit card debt – try to pay off what you can each month (and always the minimum), and be prepared to pay it off before the 0% period ends. NatWest currently offers a 13-month 0% Balance Transfer card, which is one of the best deals around right now.
Pension
The State Pension is not enough to live a comfortable retirement, currently coming in at a maximum of £11,502.40 a year – and that’s if you’ve paid enough National Insurance to qualify. There is also no guarantee of what future State Pensions will look like, so younger people could see a very different social security net in their retirement years. That’s why it’s important to have a separate private pension – as well as giving you more control over where you invest your retirement funds.
If you’ve opted out of your workplace pension, it’s time to reconsider. A small salary sacrifice each month now will result in a much more comfortable retirement down the line. It can be hard to see your money taken off your payslip each month, especially when times are tight – but not having a workplace pension means you’re missing out on extra free money from employer and Government contributions.
For the self-employed or those who don’t qualify for a workplace pension, setting up a private pension is easy. Find one that you can pay into when you can, rather than monthly regular amounts, if that works better for you. However, regular smaller payments will quickly add up over time, and give your money time to grow in investments. It’s better to pay in £500 in regular monthly amounts of £42 than it is to pay it in one £500 annual lump sum, thanks to the way the stock market varies so much month-to-month.
Stocks and shares account
Finally, this one might seem out of reach if you’ve always got more days of the month than money in the bank. However, investing can be very small – and in fact, starting small is one of the lowest risk ways to learn about the stock market.
Set yourself up for an investing future by using an investing platform that you sweep a small amount of cash into each month. This could be a service through a bank like MoneyBox or a direct platform like eToro. If investing in the stock market seems too confusing, check out the new MoneyMagpie Investing site to get started.
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