Last week, I was talking with some gurrrrlfriends
over lunch and our conversation turned to money. That’s right, why talk about Manolos
and New York gossip when we can talk about personal finance? Take that, Carried
Bradshaw et al, we Londoners live it large… hmm.
Anyway, my Belgian pal recently moved to London and we were advising her about
UK bank accounts. Did you know each country has it’s own banking
characteristics? Not all banking products are available to everyone, credit
clearance in one country isn’t the same in another. No wonder she was confused. And while we were trying to
explain why you shouldn’t save all your money in your current account, it
dawned on us – why is it so confusing to bank in the UK?
How many accounts do we need? What type of accounts should we have? Savings
account? Current account? ISA? Fixed-rate? Foreign exchange?! Credit Cards? PERSONAL FINANCE OVERLOAD.
Well, how many bank accounts should I have?
answer is simple. Have as many or as little as you want. That’s the thing about
PERSONAL finance- doy.
There’s no hard and fast rule and there’s certainly no
MUSTS. However, with most options in life – there are plenty of shoulds. (Complete with finger waggle and knowing look.)
So, today’s Face Value Beauty Blog #MoneyMonday is a quick run through of the ‘shoulds’ of UK
personal finance. Hold onto your truffles guys, here we go!
The Basic Recipe
- One current account.
- One savings account.
Your current account for your incoming wages, your
cash withdrawals, paying your bills and your regular spending.
Your savings account (with a higher interest rate
than your current account) for putting funds away for safe-keeping and growth. And also – even
if the interest rates are a bit pants right now, at least you’re not holding all
your cash in the same place.
The Next-Level Recipe
- One Current Account
- One Savings Account
- A cash ISA
For extra bonus points and 1-UPs, one of these should ideally be an online-only account – they give better rates than accounts from your branch.
This is the same as The Basic Recipe, plus an Individual Savings
Account (an ISA).
Did you know you pay tax on your interest earned? An ISA
allows you to save up to £5,760 a year without any tax paid on the interest.
There is a SHOULD to say that you should get an ISA
before your daily savings account so you don’t have to pay tax. However the best
rates are often available on ISAs which restrict withdrawals – once you
withdraw money from your ISA, putting it back in counts as part of your annual
allowance so you can’t dip into it like a ‘normal’ savings account.
ISA’s are great for those lacking self-control (like
me!!) – once I put it in, I basically ‘can’t’ touch it for a year. I’ll thank
present-day Zoe Dubs in a couple years time when I’m rolling in some new wheelz.
(or most likely, parading round in new heels!)
The Best In Show Recipe
- One Current Account
- One Savings Account
- A cash ISA
- Another investment account
Another step up from the Next Level recipe – this combination has
your current account for your regular monies, your savings
account to hold the extra, your ISA for rainy-day funds AND another investment
account like these:
BONUS ROUND: New Investment Ingredients added!!
1) Fixed-Rate Savings.
A good way to boost your interest
rate is to ‘fix’ the rate. No, I’m not talking like match-fixing or Bob The
Builder – most savings accounts are based on variable rates( i.e. the interest
rate will vary with the economy.)
Fixed-rate accounts guarantee a certain % over
a set period. For example, put your money away for a year and you’ll get 1.8%
interest compared to to a todays rubbish rates of less than half%. Put it away for a couple
of years and you could get 3% guaranteed. Pretty decent.
Fixed-rate savings are pretty good in times like
this when the economy is slumping and interest rates are still pretty pants. However,
you lose the flexibility of moving your money around if the going suddenly gets good. If
suddenly, the interest rates start increasing, you’re stuck with your given rate for
the rest of the set period. Probably good for people who have the money to put
away and wouldn’t bother to move their money within a year, even if they did
have the choice. (think about it – even though interest rates are changing, how
often do you move your money around?).
2) Regular-Saver Accounts.
Regular-Savings are like mint-choc-chip ice cream to me – they’re my fave! These
are specific products which allow you to put an amount away every month (normally anything
between £10-£300 every month) and if you do this every month for 12 months, you
can earn some cray-cray high interest rate!
Last year, I started a Regular
Saver account where I put away £100 every month for 12 months and earnt 8% interest. 8%!!!
Regular-saver accounts are great for people who want
to put away a bit at a time, with the added discipline around the “you must do
this every month otherwise I keeeell you” part. (seriously – if my bank said
that, I’d be SO much more disciplined at saving!! I should start a Face Value Beauty
So there we go – three solid recipes for you to follow for personal finance fitness. There are so many more things for me to say on this but let’s not show all our cookies at once shall we?
Are you a couple, a stay-at-home mum, an environmentalists or an ethical activist? – there are plenty more options to discover in the world of UK bank accounts, who knew?!
My Belgian pal has a whole new land of fun to look forward to now…. or at least, something more interesting to talk about over lunch.
To finish – here’s an adorable picture of a puppy, lying on some cash. Why not?
Hope you enjoyed today’s #MoneyMonday my dear Face Value Friends.
Would love to know the personal finance topics which bug you the most!
Which recipe do you follow? WOULD you join Face Value Beauty Bank?!!!
** This #MoneyMonday is dedicated to Mr FV, who needs to GET AN ISA!! (still love you, FOOL.)