Only recently have I noticed and had my eyes open to the world of money-saving, a simple act but I feel that many young people fail to implement this or if they are then it is through the encouragement of their parents. Many of us may start earning money at the ages of 16/17 where we enter our basic entry-level jobs, at this stage we probably feel that 50 pounds a week is a hefty sum of money. As we grow older and begin to enter the stages of university we may then apply for student loans and then that day comes where you check the atm and see the figure on screen, cue the fattest smile on your face.
Your first year passes and then your second but where exactly has your money been going I remember asking myself that question and wondering how on earth I ended up with the amount I did having received the loans throughout the year. You see as a student, especially one living at home you incur minimal costs in your life and it is these times where the simple act of saving money can go a long way to a better future. Having gone through the teaching curriculum I really do feel that this aspect has been severely left out where the core skills of money management was never really taught. I feel it is simple advise that had I received much earlier would have benefitted me greatly hence the creation of this post.
So where do we begin with saving and is it a case of simply setting aside money, well yes that is the case but a few procedures need following and basic understanding of the different types of bank accounts available to us. If we take the example of an individual starting university then typically banks offer special accounts for students, the perk that comes with this type of account is that a considerable about of overdraft is offered. For example a student account may have an overdraft limit of £1,500 therefore should you run out of money you will be entitled to continue spending up to the amount of -£1,500. Obviously this is not recommended but it acts as a lovely safety net that I personally have benefitted from at times. This type of account is reviewed by the bank each year and once your student life is over the account is turned back into a ‘normal’ account where you may not have an overdraft limit. If you have no overdraft limit you must be careful as banks love to charge hefty amounts I recall once going into overdraft and eventually being charged in excess of £300.
The World of ISA’s
It was during my placement year at the Greater London Authority that through discussions with colleagues that I came across ISA’s. The acronym ISA stands for Individual Saving Account but I am not going to go into depth about what exactly an ISA is this link does it all.
All you really need to know is that it is a special account where one has a set limit to put into the account in any given tax year. The government decides this figure each year and for this tax year it is £5,340, however if you take out money from this account then it also decreases your allowance for the year. So if I had an account with £2000 at the start of this tax year and took out £1000 then I would be left with £4,340 remaining allowance to put into my account. The benefits of this account is that the more money invested the higher return at the end of the tax year, each bank offer ISA’s with varying percentages of return. Check out this link for the ISA’s on the market now.
The age of online banking
To really keep up to date with where your money is going it is paramount to have an online account there are times where one wishes to examine all their money transfer or generate reports for their monthly expenditures. Lloyd’s bank recently launched their money manager software which goes a step further and calculates the area ones money is going i.e £50 on car , £100 on groceries etc.
Another major benefit of online banking is that it offers the flexibility of transferring money between your accounts so if we had our a) Current Account b) ISA account we can easily choose to transfer money between the two. One can also setup standing order forms to automatically pay money into the ISA account.
Banks also offer varying saving accounts so I would also recommend that another ‘normal’ saving account is opened up which then offers you the flexibility to take out money without decreasing that yearly allowance that ISA accounts hold. This way you have the peace of mind knowing that all money going into your ISA account is strictly for that account and will remain in the account whereas the money for savings may be taken out when required.
I used to think sticking with a current account was the best way forward however it becomes very easy to spend that money your cash is but a chip and pin away and before you know it your feeling guilty about yourself. Opening up a ISA and saving account ensures that you are investing in your own future and that your being proactive with your money. Banks love it when they see money being managed well this increases your credit rating and eventually will benefit you greatly when the time of buying your house comes about.
So the step to take is to sit down analyse your incoming and outgoing transactions, think about the figures you want to invest with and get up and visit your local bank. The advisors will be more than happy to help and in turn acting now will no doubt proof fruitful for your future.