I’m pretty damn good at saving money, if I say so myself. I pop money each payday into my savings account and swiftly forget about it. It made me feel very adult, until I realised perhaps a savings account isn’t the best thing to save in? I mean, I’d heard the words ISA being thrown around but I didn’t really know, or care, what they were. Suddenly not quite so adult. So I thought I’d look up the different options so that, if I ever felt brave enough to move my stash of savings, I’d know where to put it.
And then obviously, being a blogger, I decided to tell you all about it. I figured if I’m confused about it, other 20-somethings (and no shame if you’re older and still befuddled by the whole thing) probably are. If you’re still struggling with saving on a budget, check out my post here.
Cash savings
There are, apparently, more than one type of cash savings. Seriously, eh?
Instant access savings accounts.
This is pretty much the most basic (and what I have, obviously). It’s an account which pays more interest than your bank account (usually) and allows easy deposits and withdrawals. This means it is easy to save, but also really easy to take it back out and spend it again. Not one for the weak willed.
Regular savings account
Not too different to an instant access account, but you have to pay a minimum amount each month and you have to pay a minimum number of payments for a year before you are allowed access. Probably best for those saving for a goal (ahem, holidays, house deposit etc) in a years time and can’t be trusted to not spend it otherwise.
NISAs
Short for New Cash ISA, as apparently cash ISA and stocks & shares ISAs were put together in 2014. I had to call Clive up on this one to double check what it is as the internet was being very unhelpful – too much jargon. A NISA is basically a standard saving account, except you don’t get taxed on the interest. The only catch is you have a maximum you can put in in one tax year – according to the Money Advice Service this is £15,000 so if you haven’t saved up past that, it’s worth doing.
Premium bonds
These I have heard of, mainly because my parents had an account for me. You don’t earn interest in bonds but every £1 you have is entered into a monthly draw to win £1 million. It’s like a FREE LOTTERY! There are also smaller prizes, everyone always seems to win £25 which is more interest than I would make a year on my current savings so if you’ve not got a lot saved up, seems a good plan. Premium bonds aren’t technically savings, you buy bonds and then sell them back for the same cost. If that makes sense. If you do win a prize, it’s tax free (woop woop) but the likelihood is, unless you win a big prize you won’t get as much money as you would from interest in a savings account so over time, you money gets worth less because of inflation.
Credit union savings account
A credit union is run by real people who use the service; members pool their savings and lend to each other. The members of a credit union have a ‘common bond’ – something in common such as working together. Instead of interest, you normally get a yearly pay out called a dividend, but the amount varies on how much money the credit union has made and how much you’ve saved. It’s perfectly legit but for some reason it makes me feel a tad uneasy. I know banks aren’t exactly role models for keeping savings safe but it’s the norm and it makes me feel safe. The psychology student inside me is very disappointed. If you’re not such a sheep, you’ll be pleased to know that credit union savings are protected by the Financial Services Compensation Scheme, meaning if you lose anything up to £85,000 you’ll get it back.
Shares
Shares are a type of investment, rather than savings, but worth mentioning anyway. Buying a share of a company basically buys a piece of the company’s value, so if that value goes up your share goes up in value. If you have the money to invest, and either a) knowledge of the stock market or b) a lot of time to research the stock market, it’s an amazing way of getting huge returns on your money. However, you may also lose your money. Risky business. Personally, if I was rich I would 100% be on buying shares. At this moment in time, even using all my savings for shares would barely be worth it, and I’d be screwed if I lost it. Once again, the rich get richer!
I’ll be honest, knowing what the different types of savings are hasn’t reassured me completely with what I should be doing; they all have their pros and cons and I don’t know enough about savings to make an informed decision. My instinct is to ask Clive, because I am clearly not as adult as I want to be, but if you dad isn’t there at your beck and call for advise on things like this you can speak to a financial advisor who will tell you what is the best option, but they’re really expensive. Or as Clive put it, “they get paid shit loads to save you money”. Bit backwards, especially if you don’t have a shit ton of money to pay them.
Another option is Nutmeg, which is an online platform that essentially does the job of a financial advisor, except there’s only a 1% fee maximum (which goes down the more you invest). When you sign up, you answer some questions about your financial situation and are put into a different risk group depending on how long you’re saving over and how you feel about money. If you’re looking to invest and get money back over a long period of time and don’t mind mind risking losing some because you’ll eventually win it back (not actually win though obviously) you’d be assigned a higher risk taker and may have your money split across things like property as well as ISAs, whereas a low risk taker will have their savings in government protected schemes. With your savings being online, you can log in and see what’s the deal whenever you want, which is a lot easier to do than if you go ahead and spread out your savings yourself. It’s good for people wanting to save or invest but don’t have the knowledge to do so for the best return. Obviously the more money you invest, the most you save but you can definitely get a better interest than just sticking it in your savings account. Like I have. Awkward.
Here’s a video of how Nutmeg works but you can sign up for a free portfolio so if you are interested, give it a go.
Do you know anything about this? And if so, did it come easily to you or did you just kind of want to cry in your hands rather than actually sort out your savings?
*This post was written in collaboration with Nutmeg but all opinions are my own.
**Do you enjoy educational posts about adult things like this? Because I quite like researching them and happy to help out a fellow confused soul. Let me know!
