At Succession Wealth, we believe that you should always try to pay yourself first. What we mean by this is that you should save or invest part of your income as soon as you get it, rather than hoping there’s something left at the end of the month. If you use a budget to control your spending, then it’s likely that you’ll end up with more disposable income and ultimately this could help you build up more savings.

For the purposes of this article, ‘saving’ is defined as putting money aside, into savings accounts in a bank or building society for short term use or as an emergency fund, not to help with your long-term goals. “Investing” is defined as taking some of your money and trying to make it grow or generate income from it using financial products that you think will increase in value. For example, you might invest in stocks and shares ISAs, investment bonds or units in a fund.

Time to get creative and make your money work for you

If you have a properly worked out budget then you should have money left over to save and invest each month, and it’s important to put that money to good use as soon as you can. We have listed a few examples below, and your Wealth Planner can help guide you to those which may be most suitable for your individual circumstances. Some of these options may seem obvious, like a regular saving account, and some may be options that you’re already using. However, setting time aside to think about how you could make better use of any disposable income, and considering all your options, may provide you with additional savings.

Regular Savings Accounts

With a regular savings account, you commit to paying in a certain amount each month. In return, the bank or building society gives you a higher interest rate than you’d get with their current account or ordinary savings account. Also known as ‘monthly savers’ or ‘regular savers’, a regular savings account might be for you if you:
• Don’t want to invest a lump sum.
• Want to get into the habit of regular saving.
• Are saving for a special event like a wedding or a holiday.
• Want more interest than you can get with a current account or ordinary savings account.

Some providers limit the number of withdrawals you can make each year, or indeed before a certain length of time has elapsed, so this type of account may not be the best option for emergency savings to which you may need quick or frequent access. Check the rules carefully before choosing a regular savings account if you think you might need to access your money during the term.

Fixed-Rate Bonds
These are savings accounts offering a fixed interest rate on your cash for a set period of time. Typically, fixed-rate bonds can extend over periods from one year to five years. You’ll usually find that the longer you’re prepared to lock your cash away for, the higher your return will be. Tying up your cash in a fixed-rate bond is only a good idea if you’re confident you won’t need to access it, as it’s likely you’ll be subject to an interest penalty for doing so.

National Savings and Investments (NS&I)

NS&I are Government-backed savings accounts, meaning that they offer a secure way to store your money away. One of the main reasons for NS&I’s popularity is that they are backed by the Government, which provides savers with peace of mind that 100% of their money is protected.

NS&I change products often, and at any given time you’ll find various options available, including:

• Income Bonds
• Premium Bonds
• Direct ISA (a Cash ISA)
• Direct Saver (a savings account)
• Junior ISAs (Children’s Bonds are no longer available, but if you already have them you have options)
• Investment Account
• Green Savings Bonds

If security of your money is highest on your list of criteria, then NS&I may be worth considering. Speak to your Succession Planner if you would like to know more about them.

Individual Savings Account

An Individual Savings Account (ISA) allows you to save tax-free into a cash savings or an investment account. The right ISA for you depends on your goals and your attitude towards investment risk.

What are your ISA options?

Cash ISA

The main difference between an ISA and any other savings account is that it offers tax-free interest payments, so you could get more for your money. There is a limit to how much money you can put into an ISA in each tax year. The ISA allowance for the 2022/23 tax year is £20,000 which, if you don’t fully use, will be lost since it can’t be carried into the following tax year.

You're only allowed to open and pay into one Cash ISA in each tax year, although you can transfer your funds to a new ISA, but you'll have to transfer over everything you've deposited in the current tax year.

Stocks & Shares ISA

While a Cash ISA is simply a tax-free savings account, a Stocks and Shares ISA is a tax-efficient investment account that lets you put money into range of different investments.
Unlike Cash ISAs, you should only invest if you're prepared to take the risk that your investments can go down, as well as up in value.

Lifetime ISA

If you are aged 18 to 39, you can open a Lifetime ISA (LISA) and save up to £4,000 tax-free each year up to and including the day before your 50th birthday. The Government will pay a 25% bonus on your contributions, up to a maximum of £1,000 a year, and this amount is paid into your LISA each month. You can take your money out at age 60, or earlier to help you buy your first home, and you must be a first-time buyer to put the money towards a property. If you withdraw cash for any other reason, you’ll pay a withdrawal charge. Your LISA allowance forms part of your overall £20,000 annual ISA allowance for 2022/23.

Help to Buy ISA

Help to Buy ISAs are no longer available, but if you opened your Help to Buy ISA before 30 November 2019 (the date new applications closed), then you can keep saving into your account and earn a Government bonus towards your first home. Savings are tax-free, just like with any ISA product. However, a Help to Buy ISA gives you the added opportunity of earning a Government bonus.

Junior ISA

Setting up a Junior ISA (JISA) is another consideration if you want to help a child save from an early age until their 18th birthday for their education or a first home. A Junior ISA is a child’s version of a tax-free individual savings account (ISA), designed to encourage long-term saving for anyone under the age of 18.

JISAs offer a simple savings account for a child – and unlike regular savings accounts, you are allowed to keep any interest earned without having to pay Income Tax on it.

Looking to improve your financial wellbeing for today and tomorrow?

Finding ways to make your disposable income work harder for you can be so beneficial in the long term. By understanding what you can comfortably afford to save or invest, and then by putting in place a well thought through plan, you could see some great results.

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this article was accurate at the time of writing. Whilst information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may impact on the accuracy of the article.

The information in this article is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change and tax implications will be based on your individual circumstances.

The value of your investment(s) and the income derived from it, can go down as well as up and you may not get back the full amount you invested.

Please note, The Financial Conduct Authority does not regulate advice on taxation.

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