How to repair chinks in your financial armour and be ... SHIELDED
EVERYONE – whatever their age – has a financial weak spot. But there are ways to repair any chinks in our financial armour.
18–24 WEAK SPOTS:
YOUNGSTERS are least confident about managing money, least financially resilient, cannot afford to save and need help budgeting. Most have no pension.
One in ten youngsters are in financial difficulty and have missed making bill payments in at least three of the last six months. TOP TIPS:
VISIT the free and impartial Government-backed Money Advice Service website (moneyadviceservice.org.uk) for information on key money issues such as budgeting, starting a pension and choosing a mortgage.
BEWARE that skipping bill or credit payments can have a lasting financial impact as they are recorded on a personal credit file.
Every adult has a credit record. It details a person’s financial history and lenders use it before deciding whether to issue a credit card or mortgage. For more information, visit the website of any of the three credit reference agencies – experian.co.uk, equifax.co.uk and callcredit.co.uk.
MAKE money from shopping by buying online via cashback websites such as Quidco and TopCashback. Search these websites for deals first, then with a click you are transferred to the retailer’s own website. As a result, the cashback website returns a percentage of spending back to you.
This applies to all kinds of shopping such as clothes, insurance, flights and broadband offers.
EARN cashback from your current account. Many banks offer this if you first activate any offer online. But you do not have to buy once you do this – just click on those online retailers you might spend with.
TRY technology for help with budgeting. Digital banking app Revolut tracks your spending so you can see how much you spend on what and where – such as meals out and groceries. Alternatively, for £3.99 a month there is Squirrel which helps control your spending when you do not trust yourself to shop within your means. It holds your money securely in a separate account in your name, then releases cash when bills are due, diverts money to savings and tells you how much you can spend each week or month.
In just over three years 15,000 customers have used Squirrel and put aside a combined £2 million towards their savings goals. You can try it free for three months.
GET free help with bills and work out a budget with tools from Citizens Advice. Visit the website citizensadvice.org.uk/ debt-and-money.
START small and often with savings using a regular or easy access account.
Current account customers of Nationwide Building Society, First Direct, M&S Bank and Santander can all access a regular savings account paying an inflation-busting 5 per cent. Minimum monthly contributions are low – from £1 with Nationwide and Santander.
25–34 WEAK SPOTS: Mortgage affordability, debt and insurance.
‘GENERATION rent’ are struggling to buy a home. Despite growing incomes this group is most likely to be overindebted – struggling with household bills. They are also more likely to be overdrawn.
Most have little insurance to cover their income if they die, fall ill or have an accident.
A majority of renters have no insurance to cover their belongings in the event of fire, flood or theft. Pension pots are small, savings are low and financial resilience is resultingly wafer-thin. TOP TIPS:
REDUCE debt as this is key to any successful mortgage application. If dipping into an overdraft, use one that is authorised by your bank and free. Switch to a better bank deal if needed. Nationwide, M&S Bank, First Direct and Santander all offer current accounts with free overdraft use up to certain limits.
CONSIDER buying property with the Government-backed Help-to-Buy scheme. It allows you to purchase a share of a newly built property and pay rent on the percentage you do not own via shared ownership.
With an equity loan you only need a 5 per cent deposit. The Government lends you 20 per cent which means you can access cheaper mortgage deals for the remaining 75 per cent of the cost of the home.
DO NOT turn your back on pension saving via auto-enrolment. All eligible workers will be automatically signed up to a workplace pension by next year but can opt-out. Experts agree it is better to stay enrolled. For details about starting a workplace pension visit gov.uk/ workplace-pensions. Adrian Boulding, of provider NOW: Pensions, says: ‘For young people, pension saving is a low priority. But the earlier you start, the easier it will be to build a decent sized retirement pot. The earliest contributions are the most valuable as they benefit from the longest period of investment growth.’
LEARN about protection insurance – from life insurance to critical illness cover – and how it might help your family in a crisis. Use a broker such as LifeSearch (lifesearch.co.uk) for free expert advice.
ASK yourself whether you have sufficient home contents insurance.
Georgie Frost, head of consumer affairs at comparison website GoCompare, says: ‘Consider this: pick up your home and turn it upside down.
‘Everything that falls out, plus your floor and wall coverings, are your “contents”. It is not just your phone, TV or other highvalue items.
‘Then ask yourself: “Could I afford to replace everything in the event of a burglary or severe
damage, such as after a fire or flood?” If the answer is no, good quality contents insurance, often inexpensive, is the answer.’
35–44
DEBT levels are still high, which together with high living expenses stifles savings opportunities. Borrowers of this age are also more likely to be paying credit card interest as they do not pay off balances in full each month.
Retirement planning is a low priority and some mortgage holders are financially stretched with little protection if their income falls. TOP TIPS:
MSHIFT credit card debt to an interest-free alternative, giving you breathing space to pay it off. Some providers allow you to transfer your debt and charge no interest on it for more than three years.
Fees will apply but you can compare offers at comparison website MoneySupermarket and use its ‘smart search’ tool to find which cards you are likely to be accepted for.
LOOK ahead if your mortgage deal is coming to an end and consider fixing on to a new deal. You can agree a fixed rate several months in advance of moving on to it.
SEEK an adviser who will take a holistic view of your finances – including mortgages, investments, pensions, savings, insurance and protection insurance.
Find an adviser using free search website unbiased.co.uk.
BUILD savings. Find accounts paying the best rates by visiting savingschampion.co.uk.
You can also receive free alerts from its Rate Tracker service, warning you when rates fall and when it is time to switch savings accounts.
45–54
THIS age band accounts for twofifths of all customers with an interest-only mortgage – a product popular 20 years ago. Borrowers are only repaying interest on their loan and will need to repay the debt when their term ends. Many deals are maturing but thousands of borrowers do not have enough money to repay the loan. TOP TIPS:
ENGAGE with your mortgage lender if you receive a letter about the imminent end of an interestonly deal. Some borrowers may be able to extend the term and switch to a ‘repayment’ deal, paying off both interest and capital.
REMEMBER your pension. Even after years of saving into one, many people in this age group do not know how much they and their employers are contributing each month. Contact your provider to find out the value of your pension.
REDISCOVER small pension pots left behind when you switched jobs. Use the Pension Tracing Service. Visit gov.uk/find-pension-contact-details or call 0345 6002 537.
USE a pension calculator to work out your likely retirement income – see moneyadviceservice.org.uk/ tools.
START a pension late rather than never at all. For those who can only afford to save a little each month there are stakeholder pensions with capped charges and which can be started with just £20 a month.
55–64 WEAK SPOTS: Pension options, professional advice, scams.
NEARLY one fifth of people in this group who have accessed a pension in the last two years do not know precisely what they have done – whether it was to buy an income for life, known as an annuity, or draw down income from a fund that remains invested.
People in this age group are prime targets for scammers – particularly in relation to tapping a pension. One in three have been contacted out-of-the-blue about pensions or investments in the last 12 months. Of these, around 5 per cent have responded to a fraudulent approach. TOP TIPS:
TAKE time to learn the different avenues for withdrawing a pension. Free guidance is available from Pension Wise. Book an appointment online, over the phone or face-toface. Visit pensionwise.gov.uk or call 0800 138 3944. Further information and help is also available from The Pensions Advisory Service at pensionsadvisoryservice.org. uk or call 0300 123 1047.
FIND a financial adviser to guide you through the pensions maze and who can make personal recommendations – which the Pension Wise service cannot do. Use findan-adviser websites unbiased.co.uk and vouchedfor.co.uk.
BE scam-aware – because fraudsters stand between you and a comfortable retirement. Never respond to any unsolicited approach about your pension.
LEARN about the Financial Fraud Action UK’s ‘take five’ campaign to help people avoid a scam. Visit takefive-stopfraud.org.uk.
65 AND OVER WEAK SPOTS: Failure to shop around, low confidence, care costs, internet security.
THIS age group is unwilling to deviate from well-known household brands and fails to shop around for better deals, often as a result of a sense of loyalty. Over-65s are also less likely to check security online.
Despite healthy looking balance sheets – owning assets and having little debt – the over-65s are still financially vulnerable. This is because of failing health and concerns over care costs.
Some retirees worry they will run out of money. TOP TIPS:
UNDERSTAND how to fund care costs by visiting the ‘care and support’ section of nhs.uk. Click on ‘money and your rights’, then ‘how to fund your care’. Information is also available from charity Turn2us which matches people with any benefits and grants they are entitled to. Visit turn2us.org.uk.
FIND free advice about internet security at getsafeonline.org.
For example, when shopping online there are three ways to ensure the website is secure before handing over credit card details. First, a padlock symbol should appear in the window where you typed the website address. This is at the point where you need to log in or register.
Second, the website should start with https:// – the ‘s’ standing for ‘secure’. And last, the website address bar should then turn green in colour.
DO NOT be afraid of switching suppliers for energy, insurance and broadband. Loyalty rarely pays dividends.