ISAs and Invective: A Hiding to Nothing?
Over the last few weeks, I’ve been circulating regularly to keep myself informed about all the recommendations for the new ISA season, conscious that Which4U has been sporting a different approach to most other financial and media outlets.
I’ve also caught sight of those hard-to-miss stories about trolling. I’m not suggesting that it’s particularly prominent in the nondescript field of personal finance, but it has been interesting to note the abrasive nature of public response to ISA reporting – especially across the tabloids.
A number of readers are choosing to interpret the attention given to ISAs as a personal affront to themselves and/or others who don’t amass thousands in savings. And vented fury against banks often becomes an impromptu personal invective.
The disdain towards the financial system is understandable. There’s numerous reasons for concern:
The ISA Contagion
There’s a new contagion going around during ISA season. It’s called longevitus. And it’s catching fast.
As it stands, the usual game of cat-and-mouse is taking place as banks continue to snare UK savers seeking the right home for their tax-free cash ISA allowance.
Some banks have declared their rates early, hoping to tempt savers into an early decision. Others have paused, observed their rivals, and tried to usurp them with Promethean intent.
As more reveal their sparkling new ISA products, there is a distinct pattern emerging which differs from the recent past. Few institutions are still banking on a one year plan. The assumption must be that consumers are not thinking this way either.
Santander 123 Current Account
Santander’s reputation for lateral thinking and adding creativity to the marketplace precedes them.
Last year, they released an up-front interest bond which was proudly self-fashioned as ‘revolutionary’. This year they may be on the trail of something similar as they come to launch the new Current Account on Monday.
The market for current accounts has grown stagnant in recent years. Focus has now switched almost entirely to overdraft facilities, to the point where most active current accounts do not offer any interest at all.
The new 123 current account breaks the mould by returning the attention back to interest, while also offering cashback, a feature not usually associated with current accounts.
Savings and Incentives: How ISAs Perform After One Year
Have you ever wondered why your savings rates just seem to dissipate without you knowing a great deal about it?
For some time now, banks have penalised loyal savers by loading instant access savings accounts with tempting bonus rates that expire after 12 months and return very little thereafter. Only by chopping and changing every year are savers usually able to benefit by playing the banks at their own game.
A report at the end of last year showed that the average rate on instant access cash ISAs had slumped to a pitiful 0.53%, which has added insult to injury given the irrepressible squeeze on living standards.
A concerted focus on inflation and savings in recent months, however, has brought the incentivised nature of savings accounts to savers’ attentions.
With many savers now aware that they have to switch regularly to gain returns on their savings, the apathy and immobility that banks have exploited is running thin. Banks are now having to consider their rates beyond the first 12 months to remain competitive.
A Riposte Against Inflation-Linked Savings
Dare I turn curmudgeon and utter the immortal words “I told you so”? It’s tempting, even when a cavalier attitude is decidedly unwise and there are considerable difficulties in finding any certainties in the current economic climate.
But I’ve been sceptical of inflation-linked bonds for a few months now [see our November editorial] and it’s quite a surprise that it’s taken the esteemed Financial Times until February to pay these ‘vogue’ products some sustained attention.
The cost of living soared last year, and savings accounts offered little. Consumers felt panicked by the rush to sign up for ‘limited edition’, long-term, inflation-linked bonds. But was this the right way to react to inflation hitting 5%?
Are Your Children Future Debtors or Savers?
Does that £20 note that was neatly tucked away in little Stephanie’s birthday card get spent as soon as possible? Do you children have little regard for the value of money? Ask yourself a more personal question, “Do they have a bad teacher?”
Your children mimic you in more ways than you care to accept. If you’ve dug yourself into a financial hole then it’s not only time to sort out your own mess but it’s also time to teach your child about money.
Here are 7 tips that will set your little angels off on a path of money moderation:
1. The Money Matching Plan:
For every pound your child saves, match it e.g. if your child gets a £10 note as a birthday present and saves £5 in their piggy bank put another fiver in. Starting this plan off when they are young will help to teach them the value of money from an early age. As they get older you can cut down the amount you put into the kitty in order to encourage them to save more.
2. Savings Account:
My parents opened a savings account for me when I was a baby (a longgggg time ago). Over the years I consistently added monthly deposits into the account and, by the time I was 18, I ended up with about £6000. Everything bit of spare cash I had went into the account; from pocket money to paper round money. The money I eventually drew out went a very long way.
3. Goal Setting:
Help your child learn how to plan by setting a goal. If they have decided to buy something expensive but can’t afford it yet it’s time add a little fun into the mix. Draw a picture of your favourite shape or animal. Now mark out target amounts of money e.g. if they’re aiming to save £10 then you’ll need to have 10 marks running up the side of the shape, each one labeled: £1, £2, £3, etc. Now ask your child to colour in the section as they hit each target. Visual progress tracking made easy.
4. A Picture Paints A Thousand Words:
Many entrepreneurs have said that we should have a picture of our deepest desires front and centre. Put a picture of what they want all over the house; in their bedroom, in the bathroom, in the kitchen, etc. This will give them a constant reminder of what they’re saving for.
5. Wish Lists:
Wish lists are a great idea. Similar to having a picture in front of you, lists encourage your children to visualise what they want. If they have a number of ‘must have’ items on the list get them to prioritise the list.
6. Monkey See, Monkey Do:
Or, to put it another way, lead by example and let your children see you practicing what you preach. Have your own piggy bank at home. Alternatively, take your child with you to put money in the bank and tell your child why you’re doing this. Simple yet very effective.
7. Spend Their Money:
I don’t mean raid their piggy bank for a new pair of shoes! Sometimes children forget. My youngest was so focussed on saving that, over the space of about 6 months, she saved up over £100 but didn’t spend it! Obviously, we don’t want them to spend it all but a little purchase here and there can be used a way of teaching your child how to buy in moderation.
Other Helpful Tips:
Regardless of how much money your child saves, praise them.
Give them constant encouragement even if they are a little reckless with their spending.
Future debtors or money savers? You can stick your head in the sand or you can teach them how to save money and give the a good head start in life. Which option do you choose?
This article was written for Which4U by James, co-author for moneysavingzone.co.uk a site that prides themselves on offering their readers a selection of ideas and tips to help them save money on just about anything you can think of.
What To Do With Your Savings
It’s an interesting time in the UK economy. The cost of living has started to fall sharply, as many (including ourselves) expected it would. With the rise in VAT from January 2011 now leaving the 12-month comparison, the RPI measure of inflation has dropped below 4%.
Now, for the first time in several months, fixed-rate bonds and fixed-rate ISAs are in a position to offer real rates of return. But even so, none of us can be absolutely sure whether this will hold in the medium term. The Bank of England has announced further quantitative easing measures, and opinion between forecasters varies considerably.
This fall in inflation has prompted consumers to think about saving. However, many remain unsure about their best options. Which4U’s new savings guides focus on these savings issues to present the best options. Let’s preview a few of these now:
Saving Grace: How much compensation are you entitled to if a bank fails?
Any ideas? Don’t worry if not. You’re in the majority.
UK savers are protected for up to £85,000 per person per financial institution.
And despite a multi-million-pound television advertising campaign designed to raise awareness about the guaranteed compensation level for savings UK deposits, only 3% of people are aware of the measures at the close of 2011, according to the Financial Services Compensation Scheme (FSCS).
FSCS Advert...? (Nope. Me neither)
A Whole New Banking Crisis
"Robbing the poor to feed the rich"
The ‘banking crisis’ is set to strike a new low in confidence at the end of 2011. And there is no Eurozone to blame here; it is a situation entirely of UK banks’ own making.
This week has been a decidedly poor one for banks, and has highlighted several problems endemic within the financial system.
Inflation-Linked Savings: Smoke and Mirrors
There have been some significant moves in the market for savings products this week, mostly driven by concerns about inflation.
Santander has looked to muscle into the space vacated by NS&I, who announced a withdrawal of their popular inflation-linked Investment Accounts in November.
Following their self-acclaimed ‘revolutionary’ up-front interest bond, Santander’s Inflation-Linked Savings Bond pays the rise in the Retail Price Index over a six-year period.