WOULD you believe it? It appears something positive has come out of the financial mayhem that has accompanied lockdown, and all our other problems, over the past year. Hold on - it’s now a year and a quarter, since lockdown started at the end of March 2020 – wow!
The good news is that, despite the many obstacles faced by women in earning, saving, and paying into their pensions, one in four women earned more than their male partner in the past year.
We have also mentioned previously in this column that, according to the financial consultancy LCP, six million (other) people in the UK are actually better off than before lockdown. This is mainly because we saved money on eating out, socialising, personal care and hairdressers, holidays of course, and not using the car or transport quite so much.
As a result, the pandemic has created a whole group of these ‘accidental savers’, many of whom told LCP they’ve been able to save thousands.
Have you been able to salt away a few hundred or more? If so, have you thought of doing something useful with it, like savings or investments?
Here are some great tips for making your nest egg (chicken size) grow into an ostrich egg!
Well, regular readers of this page will know that for long-term saving, you can’t beat your personal or workplace pension to get the ‘golden trinity’ of growth on your cash.
First, government tax relief, so that as a basic rate taxpayer the taxman tops up every £80 you save to £100. Second, in the workplace, if your employer agrees you can get extra employer contributions. And third, of course, any pension saving brings you the benefit of compound interest.
Never before has such a wonderful thing had such a boring name.
Compound interest is where your money earns interest, which stays in your pension, so that the following year, you have interest on more money than before.
The Germans put this best - they call it the interest on interest effect (der Zinseszinseffekt), and so it’s no wonder it came to the attention of Albert Einstein, no slouch with adding numbers himself, who called it ‘the eighth wonder of the world’, and added ‘he who understands it, earns it, he who doesn’t, pays it.’
Just think of it as a snowball effect on your money.
The second idea is an Isa. The advantage of an Isa is that it allows you to avoid tax on any gains your money makes. Now, if you want an easy-access Isa, where your cash is available any day, interest rates are very low at the moment, but you can get higher rates if you are prepared to lock your money in for a year, or even five.
You can have a Cash Isa, or a Stocks and Shares Isa where your money can potentially gain better growth in the stock markets.
Then there are investment funds. If you get the right one, these can give you strong returns in the medium term. However, you need to take advice on this.
There are a large number of funds in the market that are great, but also many that aren’t doing so well. In fact, the funds tracking company Bestinvest say that currently there are 119 under-performing funds, containing an average of £154m, that are failing to meet their growth targets over the last three years.
There are also fees involved in funds investments, which will eat into your money.
Nonetheless, funds are very much worth a look – and we can make sure we find you the good one that is perfect for your needs.
Are you one of those women who has out-earned their partner in the last year? Have you saved a few pounds?
Would you like to ‘stash your cash’ where it will continue to grow for you?
Our no-obligation, friendly advice is only a phone call away.
:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com
