Round up your sheep and protect your money

Wouldn’t it be nice if our assets had a sheepdog to round them up, so they kept growing every year?

A SHEPHERD asks his sheepdog to count the flock.

The sheepdog does a quick round of the field, comes back to the shepherd, and says ‘50'.

“How can there be 50?” says the shepherd, “I only had 48.”

The sheepdog says: “I rounded them up.”

Yes, it's a financial adviser's joke - but as ever with my words of wisdom, there's a grain of truth that could help your finances.

Wouldn't it be nice if our assets had a sheepdog to round them up, so they kept growing every year? Unfortunately it's not that straightforward, where cash money is involved. Especially given the latest news about the rising price of things.

There's been much talk lately about inflation. Inflation, of course, is the index that shows us prices of our domestic commodities are on the rise, and that our wages might not be stretching quite as far.

That's why some call inflation ‘the silent bank robber'. It's a good analogy – like crime, people only talk about it when it's on the rise.

And so it was that we financial advisers got perturbed when the Consumer Price Index, the main indicator of inflation, reached 2.5 per cent in July. Then we fell to our knees in tears when it jumped to 2.7 per cent in August.

And then, just to ruin everyone's August holidays, the Bank of England said the big price rises were in entertainment and leisure: holidays, restaurants, drink, theatre tickets, and computer games rose 3.6 per cent in the past year.

Now, if you're old enough to remember Harold Wilson in Downing Street (and God that's old), well, between taking another puff of his pipe, Harold was very fond of talking about ‘the pound in your pocket'. Since Harold's day, we've replaced paper pounds with brass ones, but inflation is still busily eroding them, in terms of our spending power – and if you aren't getting a wage increase that keeps you ahead of inflation, then you are quite literally getting poorer, in real terms.

For savers, it's the same story. When prices inflate, Harold's pound in your pocket deflates, which makes it very hard to keep your money working hard for you.

The fact is that 99 per cent of savings accounts are now failing to keep up with inflation, according to the financial researchers at Moneyfacts. Even if you are prepared to lock your money away in a fixed rate savings bond, there are only four of them that can keep up with these inflation rates – and the top rate of 2.75 per cent requires you to lock your money in for seven years.

Many of us aren't so keen to make that kind of a commitment. After all, anybody running a car knows we need money handy - those sudden and unexpected repair costs helpfully soak up any spare cash that we have.

Now there is a new savings initiative that can help, provided that you qualify. Anyone entitled to Working Tax Credit, or receiving Universal Credit, could well qualify to open one of the new government-backed ‘Help To Save' accounts.

With Help To Save you can save up to £50 each month, and you get a bonus of 50p for every £1 you save over four years.

You don't have to wait the full four years for your first bonus, though – the first part of your bonus comes at the end of year two. The good part is that you don't have to save every month, plus you can still keep on, even if for any reason you cease to qualify for benefits.

If you close the account early, your bonuses stop. If you keep going for the four years, you receive your final bonuses. You withdraw your money and bonuses to your bank account, and the Help To Save account is then automatically closed.

It's a good scheme for qualifying savers and, since it's backed by the government, all savings in the scheme are secure.

Don't get caught out by the ‘silent bank robber'. Round up your sheep, and protect your money today.

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information is on the Facebook page 'Kennedy Independent Financial Advice Ltd' and the website

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