Chapter 6 – Navigating Your Bank Balance
These mini-money guides are based on the practical money book "You're Not Broke You're Pre-Rich" by Emilie Bellet.
If your money has been sitting for years in the same bank account - maybe the same one you’ve always since you were 16 - then this chapter is for you.
Should you save your money, invest it, or both? It will depend on what your goals are, and how much time you have to achieve them.
The general rule is that if you need the money back within 10 years, it’s best to save it, and anything longer than 10 years you might want to consider investing - but only once you feel clear how to do it. Investing doesn’t mean putting all your cash into your friend’s start-up!
And whatever you do, after you’ve built up that emergency fund, don’t touch it. The emergency fund gives you a buffer in case life throws you a curveball.
Another tip is to keep your savings in a separate account, so you can more easily understand if you’re on the right track and you won’t be as tempted to spend your savings. And if you’re looking to switch banks or open a savings account, shop around first. Does the bank offer a decent interest rate - known as the Annual Equivalent Rate? (Some current accounts are starting to offer a higher rate so it’s worth looking at them too.) What do the customer reviews say? Does it have branches you can visit or is it app-only, such as Starling Bank or Monzo? How much would you like to save and how often will you be contributing to your savings? Most comparison websites should provide this information, to match you with the provider that suits your needs.
There are different kinds of savings accounts - the most common types are the instant or easy access accounts, fixed rate savings accounts, ‘regular’ savings accounts, and premium bonds. Each will have their own terms and interest rate, and it once again comes back to how much you can save and for how long.
The most commonly talked about kind of savings fund is the Individual Savings Account (ISA), where you don’t pay tax on the interest, and you can pass on the ISA to your partner as an inheritance without losing the tax advantage. There are half a dozen types of ISAs and they are all slightly different, but the tax advantages are the same.
The main ones for saving are cash ISAs, Help-to-buy ISAs and lifetime ISAs, which can either be used as a pension or to buy your first home. You can open several ISAs in one year - but not a cash ISA and a Help-to-buy ISA in the same tax year - and the yearly maximum you can put in is £20,000 (£4,000 a year for a Lifetime ISA) for this tax year (2019/2020).
Now we come to pensions, which are savings for the very long term and retirement. We might like to pretend this isn’t important, but it is crucial to your quality of life. The good news is that pensions are tax free - up to £40,000 a year (for the tax year 2019/20) - so you should make the most of it, whether that’s by upping your contributions to your workplace pension and / or opening your own.
You will see that, year after year, governments and budgets change as well as this landscape. Of course, rules and regulations are extremely important, but what’s even more crucial is the way saving works. You should always take great care of your money and make sure it’s in the right place.
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If you want to learn more about the book and see a few photos from the book tour, it’s here. You can order "You're Not Broke, You're Pre-Rich" on Amazon and if you’ve read the book and enjoyed it, I will be forever grateful if you could review it on Amazon or Goodreads.
DISCOVER MORE CONTENT FROM THE BOOK
Chapter 2 – Get Real With Your Money
Chapter 3 – Planning For The Future
Chapter 4 – Own It: Get A Grip On Your Money
Chapter 5 – Asking For More £££
Chapter 6 – Navigating Your Bank Balance
Chapter 7 – How Does Investing Work?
Chapter 8 – Investing in The ‘Stock Market’
Chapter 9 – Want to Buy a House?
Thank you, Emilie