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- 15 Jul 2019
For freelancers, saving can be an integral part of making a business thrive. Saving implies security; it’s creating a financial buffer for periods of less work, as well as investment and making sure you meet your self-assessment tax requirements.
When my grandad passed away, we found nearly £800 under the mattress. His wife, my nan, didn’t even know about it. Savings accounts for the average person have been available for a century.
Assets such as property, land, gold and stocks have been a way of storing value in a reliable ‘secure’ manner since the Babylonian period. US government bonds are indeed called ‘securities’, partly because of the reliability of getting your money back.
Since the 1980s, the general public have had far more ways to save than ever before. Not least in 2019, with the advent of new technology and new financial instruments to keep your money safe.
For many, this also means accruing new value. Increasingly, people are concerned that their money is not invested in deforestation, burning fossil fuels or funding conflict. And with interest rates so low since the recession, traditional saving methods are less attractive.
As an individual or as a business, your medium-term economic health is imperative. Try and keep out of that overdraft, watch what you spend, then think about saving. If you have an accountant, you should certainly consult them before making any decisions.
But if you don’t, not to worry. The market is awash with jargon and there are so many different accounts, ISAs and stocks to look at – it can be confusing. My Money has put together the basics of what is on offer.
Every bank provides a standard savings account connected to your current account. There will be a low level of interest applied, typically below 0.8 per cent.
Most big banks provide different accounts, geared towards different age groups or different functions. HSBC, for instance, provides a regular savings account which mandates you to deposit at least £25 per month, with a decent three per cent interest rate for average HSBC customers.
There are also accounts geared towards saving for a home; or for children, which can only be accessed with parental permission. Accounts range in accessibility and when interest is paid on deposits.
Look out for Virgin Money, Sainsbury’s Bank and Tesco Bank for the better rates. There may be restrictions on how many times you can withdraw. Although this is good for saving, it may put you in a sticky situation if you find yourself in financial difficulty and need to withdraw funds.
An Individual Savings Account can be opened by any UK citizen. You must be at least 16 for a Cash ISA. This is a savings account where you do not pay tax on the interest, ever. You can save up to £20,000 in one tax year (ending April 5). They vary in terms of accessibility and rates of interest.
Stocks and Shares ISAs can include a range of bonds and shares, but you have to be over the age of 18. Obviously, any investment like this is subject to the market and your investment could be at risk. However, with that risk comes higher returns. You will have to pay a fee to a provider and then probably another small fee to invest in each stock.
Lifetime ISAs (LISAs) can be used by anyone from 18 to 40. You can deposit up to £4,000 a year and get a 25 per cent bonus every year until you are 50. If you withdraw before 60, you will lose 25 per cent of the investment. It is designed to help people save for retirement. For the self-employed, it is arguably a no-brainer. But there have been concerns that LISAs could be subject to mis-selling.
‘Management accounts’ here refers to secondary bank accounts, often provided by ‘starter’ banks which people use to manage their current accounts.
Though this is not saving per se, more and more people are using Monzo or Starling accounts to manage their money and reaping the benefits.
Accounts like these are often a bit more geared towards millennials, with apps for tracking spending. You can set targets, warnings and thresholds which help you manage your money.
Mint is probably the best known. For small businesses and the self-employed, Intuit’s QuickBooks app is increasingly popular.
There are several watchdogs which can help you decide where to save or invest. Martin Lewis of Money Saving Expert regularly writes about savings and ISAs and is a good place to start. You can also visit Ethical Consumer online, which rates investment providers in terms of their geopolitical, social and environmental impact.
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