Are You An Accidental Saver? Five Ways To Make Your Savings Work Harder For You!
This past 12 months has been a REALLY hard year for a lot of people and I’m not gonna lie, as a self employed person, it’s been pretty scary at times. But I know a lot of people have become accidental savers and I am a bit of a money geek and passionate about making your cash work harder for you. So, if you have been an accidental saver this year. Here’s five ways to make your savings work harder for you and make you feel a little more financially secure. Because you know what… cash in your current account is great, but it might work harder for you elsewhere!
Pay Off Your Credit Cards
Stick with me! I promise! Paying off your credit cards might seem UTTERLY boring, but here’s the thing, if your money is sat in your current account earning 0% interest, then it might as well go to pay off your credit card which is COSTING you money in interest every month. Plus once that credit card is paid off, you will have more money every month because you aren’t paying off the minimum amount plus it will make you feel more in control of your finances and you won’t have to worry about a credit card hanging over your head!
Just an FYI here too, if you are trying to clear a credit card and you need a little more time to do it, why not consider applying for a 0% balance transfer credit card. You will save money in interest payments which can help pay back the credit card quicker and you usually have a year of 0% interest. Just make sure you read the small print so you know exactly where you are with it. For instance, if your 0% credit card ramps up to 40% after a year, you need to know and you have to make sure you have a plan of how you can clear that credit card within a year!
Overpay Your Mortgage
I know this is a position of privilege, but if you are a homeowner, then you might want to consider using a little of your extra money overpaying your mortgage. Just a small extra contribution every month can take YEARS off your mortgage and save you an absolute fortune in interest payments. Plus, it will increase the equity on your property so you will have a bigger deposit for your next home. Seriously, it makes a HUGE difference, just check this Mortgage Overpayment Calculator. And if you can’t remember your interest rate, just use 2.5% as a rough guide. Also, an interest rate of 2.5% might sound low, and it is, but on £100,000 or £200,000 or even £500,000 it’s a HUGE amount you could save. Especially if that’s just money which would be sat in your current account not earning you interest. This way it’s SAVING you interest! Think of it this way, you could overpay your mortgage and SAVE 2% interest, OR you could put that same money in an ISA and get 0.02% interest. I know which one I would rather!
Buy Premium Bonds
Premium Bonds are the nations favourite place to invest their money, which is kinda funny because you don’t actually make any interest on Premium Bonds, however you do get entered into a monthly draw to win prize money. Every month there is a giant draw and you can win anything from £25 to £1million pounds. The only thing I would mention is that you kinda need to have a LOT of money in Premium bonds to have a shot at winning. Check out the prize amounts and odds here. However, if you have a LOT of savings, it’s still a great place to hold some cash tax free. Imagine! Anyway, if you are lucky enough to have a chunk of money which is for emergencies, rainy days or a bout of unemployment, Premium Bonds could be a great tax-free place to store it and you never know, you could get lucky!!! We actually have quite a lot held in Premium Bonds at the moment for that very reason, if we held our renovation budget in our current account we would get tax on it, where as if we hold it in Premium Bonds, we have the potential to win AND we don’t pay tax on that money.
Invest In The Stock Market OR Open A Stocks & Shares Isa
This really depends on your level of experience and your willingness to gamble. No seriously, investing in the stock market yourself is gambling. Only invest what you can afford to loose! If you are going to invest, I say invest in at least 15 companies so you have a good spread of investments and choose some ‘safer’ stocks as well as smaller companies who have the potential to grow. Also, I would advise buying shares via your bank, Hargreaves Lansdown or EQI. Alternately I know a lot of people are using apps like Robinhood or FreeTrade. Personally, I don’t use either, but I HAVE downloaded FreeTrade app and only done a few test trades so far, but I am impressed by the low charges they have, here’s my refer a friend link to get a Free Share worth between £3 and £200. Like I said, I’ve only downloaded it and done a few test trades, however, so far, it does seem like a good way to invest without the hefty commission fees.
However, if you aren’t confident with buying shares, then I would recommend a stocks & shares ISA. Let the professionals do their job and you sit back and relax! Sure you might not make as much money as you might if you did it on your own, but you also have less chance of loosing money. And trust me, you can loose money, the other day my portfolio went down £1,500! No joke! The following day it went back up £500! Again use Hargreaves Lansdown. If in doubt, Hargreaves Lansdown… hell, I believe in them so much I have shares in them!
Pay Into Your Pension
Finally, PAY INTO YOUR PENSION! This will mean different things to everyone, if you are self employed or on a temporary contract you might need to start a pension, personally I would suggest Aviva or Pension Bee. Or you might have a workplace pension which you could discuss with the finance team making a larger monthly contribution into – hopefully your workplace will chip in a little more too! Or if you have a workplace pension already and you want to start a brand new private pension, again, just head over to Aviva and start one there. For every £1 you put in, the government will add in 20% on top and then the pension company will invest all the cash for you and hopefully give you a great return ready for your retirement. It’s super easy to set up, you just have to do it! I’m personally paying in £400 a month which is more than I can afford as I haven’t made much money this year, HOWEVER, I’m doing it because I want to retire without worrying about money and the more I put in now, the more time it has to grow over the years.
And there we have it, how to spend your money wisely if you are an accidental saver this year. It’s all about being smart with your cash, it might sound boring, but if 2020 has taught us anything, we truly don’t know what’s around the corner, which is why paying a little extra into your pension or having a rainy day fund held in Premium Bonds could be a great idea! This post contains a refer-a-friend link.