4 Helpful Tips for Deciding Where to Stash Your Cash

It’s always nice to have extra cash just lying around, but sometimes you can end up saving hundreds or thousands of pounds that simply sit there. Having all that extra money poses the problem of it simply sitting there and being useless, so what can you do with it instead?

There’s a lot of things that you can do with it. The best things will ultimately benefit you in the long run. So instead of choosing to spend all that money in one fell swoop, hold onto it. Better yet, you could take that money and multiply it with enough time.

Take a look at the top 4 things you can do with your extra money so that it isn’t wasting space underneath your mattress!

1. Put That Cash In a Savings Account

The safest place to invest your cash will always be a basic savings account at your local bank. While most bank accounts will currently only return a couple of percent a year. I just checked with Clydesdale Bank and they are currently advertising up to 2% Gross/AER on a term deposit, which is higher than most easy access savings accounts. An Individual Savings Account (ISA) is an even better option as it is a more tax efficient way to invest your money, although you can only shelter up to £11,280 in ISAs.

2. Buy Some Shares of High Dividend Value Stocks

It’s true that some people are immediately turned off by the idea of investing in the stock market. For many people, the idea of investing in something that’s currently down is downright outrageous.

Investing would be silly if every publicly traded stock was falling, but that simply isn’t the case. There are many different varieties of stocks that are doing great right now. The stock market offers a high-risk, high-reward opportunity for investing your spare cash.

The only problem with investing in stocks is that you need to have enough cash to cover broker fees and other commission charges as well as the price of shares. You may also not be a stock market genius, which could further put you off from this idea.

3. Invest in a Mutual Fund

A mutual fund is one of the more “safe” investments you can put money into. Mutual funds work by having a company pool funds from a number of investors. This allows investments to be made at one time and in bulk, which makes it much cheaper to buy versus if you were to buy the same share of stocks. This company will then diversify its investments in several vehicles such as stocks, bonds and mutual funds. In turn, this is what makes mutual funds a bit safer to invest in.

While your mutual funds can differ depending on your individual agreement, you’ll earn a certain amount of money based on how well your investments do.

4. Lend Your Money to a Credit Union

If you join a local credit union, you can invest your money in a way very similar to the way banks set up loans. The added benefit you will find is that because credit unions are owned by their members, they can offer better interest rates. You’ll also see a larger share of the returns.

Two things you’ll want to look into when it comes to credit unions are the returns on savings accounts. Ensure that each has a higher interest rate than you’d get at your local bank.

The Dave Ramsey Seven Step Guide to Financial Peace

Dave Ramsey is a worldwide financial guru that has reached celebrity status. His methods have helped millions of people from all walks of life. Dave’s methods are affectionately called “The Seven Baby Steps.” These steps outline some basic financial planning strategies and a method for getting out of debt and becoming financially successful.

Step 1 – $1,000 to start an emergency fund

The first part of Ramsey’s plan is to build an emergency fund. This fund covers emergency expenses (naturally). Let’s say your water heater breaks. This is where an emergency fund would come in handy. The purpose of Ramsey’s emergency fund recommendation is to “break the cycle of debt.” By not borrowing, you can start to get yourself out of debt once and for all.

Step 2 – Pay off all debt using the Debt Snowball

The next step in Ramsey’s plan is to start paying off your debt. Start listing all of your expenses. Include your mortgage. List the smallest expenses first and don’t worry about the interest rate on the debt. Then, start paying everything off. Start with the smallest debt first. Once this is paid off, use the funds you’ve freed up from your paid off debt and apply it to the next largest debt. Continue like this until all of your debt is paid off.

Step 3 – Save up three to six months of expenses in savings

Saving up three to six months worth of expenses in your savings will do a lot to help protect you from the unexpected things in life. An emergency savings is not an investment. Dave recommends investing this into a money market account for safe keeping. A money market account is a very liquid investment that allows you to gain access to your money whenever you need it.

Step 4 – Invest 15 percent of your income into a Roth IRA and pre-tax retirement accounts

Dave’s fourth step is to start saving for retirement. When all of your debt is paid off, except your house, you should start saving 15 percent of your household income into Roth IRAs and traditional retirement accounts. He also suggests not to save more than this because any additional money will help you with steps 5 and 6. Don’t save less than this, Dave warns, because you need to save something for yourself when you retire.

Step 5 – Save money for your kid’s college education

By this step, you’ve accomplished some major life-changing things. You’ve paid off almost all of your debt, you have an emergency fund, and you have started saving for your retirement. Now it’s time to save for your child’s college education. Dave suggests that you assume a 12 percent rate of return in your investments and then reverse engineer what you would need to save based on this assumption.

Dave also does not recommend using insurance, savings bonds, zero-coupon bonds, or pre-paid college tuition in this step. He explicitly recommends using a 529 college savings plan.

Step 6 – Pay off your home early

This is where things get serious. You will start paying off your house and realise your dream of a free and clear home. This last debt hanging over your head is often times the biggest one. However, Dave recommends paying off your mortgage so that you are completely debt-free.

Step 7 – Build wealth and give

Dave puts a lot of emphasis on this last step. He suggests building wealth and then giving it away. Leaving an inheritance for future generations is the last step in the process and one that he recommends you do so that you can bless others with your excess.

Author Bio:

Guest post contributed by Glen Turpin, for Carfinance247.co.uk – vehicle financing solution providers.

Visit the CarFinance247 website for more information.

Thinking Ahead – Prepare Now For Next Christmas

With Christmas and New Year right around the corner, many of us have found that buying the perfect gifts for loved ones, financing a few festive nights out and having to buy some tasty treats for Christmas dinner all adds up. With many struggling to cover all the commitments that Christmas demands, the thought of getting prepared in advance for next Christmas is quite a tempting one.

Simply saving a small amount each month throughout the year can mean a bit of extra money in our pockets come December 2012 and if that thought appeals to you, then get organised now!

Check out some financial comparison sites like moneysupermarket.com where there are lots of options available to savers. Remember, the earlier you start, the more you will be able to save.

An account for Christmas

If you are looking specifically to finance next Christmas, one of the many new ‘Christmas saver’ accounts could be for you. These accounts are more popular than ever and are designed for savers who don’t want to touch their money until next December. There are a variety of providers, with accounts that differ slightly in their terms.

The Yorkshire Building Society, for example, offer a fixed rate of 3.5% on your savings and you can pay in a lump sum, with regular monthly amounts or simply deposit what you can, when you can. If you don’t mind a little more structure, accounts like the one from the Principality Building Society offer a higher interest rate of 5%, but you need to pay in between £20 and £300 a month for 12 months.

If next Christmas isn’t necessarily your saving focus, a regular savings account could be for you. If you are happy to pay in a monthly amount and aren’t looking to access your funds for at least a 12-month term, this type of saving will be perfect for you.

Serious saving

The market leaders in these types of accounts can offer anything from 4.1% up to 8% interest rates in some cases, based on your commitment to pay in regular monthly deposits. Some regular savings accounts ask for at least £10 a month being deposited, up to a maximum somewhere in the region of £250 a month.

If you’re simply saving for a rainy day and prefer having access to your funds whenever you may need them, choose an easy access savings account instead. As the name suggests, you can deposit as much as you like each month (in some cases accounts can be opened with as little as £1) and dip into your savings whenever you need to.

The best interest rates on the leading accounts come in around the 2.5% to 3.1% mark. However, there are plenty of easy access accounts on the market and using a financial comparison site can help you find the best options and rates for your requirements and style of saving.

In just 12 months students cost of living has gone up £42.56 per month

The monthly cost of being a student has risen by £42.56 in the last twelve months according to analysis* by Family Investments, a leading children’s saving provider. Students have seen their monthly living costs increase from £752 twelve months ago to £795 today.

Since last year, the cost of student life has risen from £9,031 to £9,541 which works out as an extra £510** over the year.  This increase does not include the new university tuition fees, adding to financial concerns of students and their parents.

In 2004, when figures on student living costs became available, the monthly cost of living was £561, since then students have seen living costs rise by 34%, an annual increase of over 5% a year.

Rent is the biggest single expense and the average student currently spends £163 a month on accommodation, up slightly from £156 a year ago. Monthly expenditure on food has increased by 38% since 2004 rising from £44 to £65. Other costs have also increased significantly, such as clothing and recreation, up by 10% and 11% respectively over the same period – making the monthly costs £40 and £56 today.

Despite increases across the majority of categories, there has been a reduction in costs of communication, which includes mobile phone costs, falling from £23 a month in 2004 to £19.62 today.

While the issue of tuition fees dominates current discussion of student finances, if the cost of living continues to rise at current rates, those students starting a degree in 2011 may see annual costs hit £11,253 by the time they graduate in 2014. The increase of £1,712 compared against today’s costs, would be a significant addition in its own right.

Kate Moore, Head of Savings and Investments at Family Investments said: “As A level results are released this week, students face an anxious wait to find out how they’ve performed in their exams, but for parents the impending cost of university is likely to be just as big a worry. Over the last six years, student living costs have risen by more than five per cent each year, significantly ahead of RPI in the same period.  With increased tuition fees now on the horizon, the total cost of a degree and the economics of student life look set to change dramatically.

“Young adults face unprecedented financial commitments and the steadily rising cost of living is yet another factor they will have to consider as costs such as food creep up. The consequences of increased tuition fees and living costs are as yet unknown but we anticipate that we will see a greater proportion of students going to university near their home town so that they can continue living with parents and possibly taking on part time jobs.

“For the average family covering these costs is likely to be a significant challenge and parents who want to give their child a helping hand will have to start saving early.  It is more important than ever that families plan their finances in advance and set up saving measures as early as possible.”

One of the best ways to start saving early is through the Junior ISA, a new tax efficient savings account for children available from the 1st November. Family Investments will offer a Junior ISA that is accessible to everyone who wants to start saving for their children’s future.

“Parents that are fortunate enough to be able to save the equivalent of the current Child Benefit allowance of £81.20 each month, could potentially build a sum of £29,300*** after 18 years. This is a significant sum that could pay for a decent slice of their child’s living costs or cover their tuition fees.”

* Based on analysis of ONS Family Spending Reports from 2004 – 2011. The analysis looked at the increasing/decreasing cost for each of the various spending categories and overall cost of living for students. The average increase/decrease in cost was taken to calculate the cost in 2011 and 2014.

** Annual figures assume the student pays costs such as rent 12 months of the year

*** Based on an annual growth rate of 7%

Only one in six of us plan for the future

Standard Life has found that people in the UK live for the moment rather than the long term, with more than one in six (17%) failing to plan their finances at all, according to recent research from the savings and investments company.

The research, which looks into the UK’s fascination with living for now, finds that almost half of Brits (45%) only plan their finances just a year ahead, or less, with only a fifth of them (22%) planning up to five years into the future. Alarmingly, only one in six people (16%) plan more than six years ahead which underlines the real necessity for the UK to start addressing their long term savings plan. Doing this is critical if they are to be financially secure, achieve their future goals and live the lifestyle they want.

Of the UK regions, it was found that those from London were the top financial planners, with one in six (17%) planning six years or more ahead. In contrast, those from Scotland came out as the least likely to make long term financial plans, with only one in ten (11%) planning more than six years ahead.

To find out more about the nation’s attitudes to planning for the future, Standard Life is launching a UK-wide poll and prize draw and linking up with boutique hotel specialist i-escape.com. Entrants have to vote on which prize they would prefer; a short break this year with accommodation from i-escape.com, or a holiday of a lifetime in five years. The results will show whether people in the UK favour instant gratification or greater long term rewards. This issue of desiring instant gratification presents an on-going challenge for the UK because people are living longer and their financial security cannot be guaranteed. It represents a huge challenge for providers and advisers who are keen to help consumers plan ahead so they can look to the future with confidence and optimism.

Bruce Kelsall, group and UK marketing director at Standard Life, said: “The growth in our ageing population has created a dramatic need to shift from a culture of spending to one of saving. People are completely comfortable making financial plans for a summer holiday; planning and investing in your future is no different. You may have to finance your lifestyle up to the age of 90 or even longer and while planning for this eventuality is essential, it needn’t be stressful. Even the smallest actions now can have a dramatic effect on your long term finances.”