Close up of someone holding a phone looking at properties

It’s often said that British people are obsessed with owning a home and property prices. A new survey indicates that’s the case, with more than half of Brits checking how much their family and friends have paid for their homes. There’s more than one reason why people love to check how much a property has sold for.

According to a survey from Zoopla, just a fifth of people think it’s acceptable to ask someone what their home is worth. Many think posing this question is “rude”, but online tools mean it’s easier than ever to snoop and harder to resist checking. 6 in 10 Brits admitted they have looked up how much others have paid for their home. From friends to colleagues, it’s become common to look at the sale price of properties of someone you know.

The survey found that some people use property prices to make presumptions about a colleague’s salary or even check potential partners. 11% has checked how much a colleague paid for their home and 3% have checked the price of their boss’s home. 8% also said they checked the value of the home of a partner, ex-partner, or someone they were dating, with the value influencing the decisions some made about their relationship.

But there are other reasons for watching property prices rise.

1. To understand your own home’s worth

Some 23% of people said they checked house prices to better understand how much their own home is worth. Your home is likely to be one of your largest assets, so it’s not surprising that people want to keep track of its value.

Your home increasing in value can also help you secure a better mortgage deal. As the property price rises, the amount of equity you hold also increases. As a result, you can take out a mortgage with a lower loan-to-value (LTV) ratio. Generally, the lower the LTV, the more competitive the interest rate you’ll be offered. For example, a first-time buyer with an LTV of 90% is likely to pay a higher interest rate than someone who needs a mortgage to cover 70% of the value of their home.

Over a mortgage, keeping track of your home’s worth and remortgaging could save you thousands of pounds in interest repayments. If you need help finding the right mortgage deal for you, please get in touch.

2. The rapid rise can be exciting to watch

House prices have soared over the last decade. And it can make watching the value of your home, and other properties, exciting to watch compared to other assets you may have.

According to the Halifax House Price Index, in the year to August 2021, house prices have increased by a huge 7.1%. The average house in the UK is now worth a record £262,954. With interest rates low on savings accounts and investment markets experiencing volatility in the last year, seeing your house price climb can be satisfying.

3. To inspire projects for your own home

Almost a fifth (18%) of snoopers said they checked properties online because they were curious to see what someone’s home looked like on the inside. As well as giving you a glimpse into someone’s life, it can be a great way to understand what’s possible with your own property or inspire ideas for your next DIY project. If you’re thinking about knocking down a wall to make living spaces open plan, for example, seeing photos from another property can help you visualise it.

It’s also a chance to see what adds value and what local buyers may be looking for. If a property is valued higher than your home, you may be able to see what improvements have a real impact. Would converting the loft lead to a return on your investment if you want to sell? Or would giving the décor a simple update have a real impact on the value of your home?

How does your home fit into your plans?

As one of your largest assets, your home is likely to play a key role in your plans too. Whether being mortgage-free is essential for your retirement plans or you hope to move to accommodate a growing family, your home may be important to your future. You may even plan to sell your home or release equity to fund plans.

Understanding what your home is worth and taking steps to reduce mortgage repayments through a competitive deal can help you get the most of your property. If you’d like to discuss your mortgage or other property needs, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Three colourful hot air balloons flying at sunrise

From the State Pension triple lock to the cost of living, Covid-19 is affecting economic figures. As the economy reopens, you may have noticed the price of things has risen. From your grocery shopping to days out, inflation means the cost of living is rising and could reach 4% this year.

A small amount of inflation is often seen as a good thing. Prices gradually rising can encourage demand, but higher levels of inflation can suggest demand is outstripping supply and that the economy is running into difficulties.

The Bank of England carefully monitors inflation and can take steps to keep it in check. It has a target of 2% inflation each year, but the inflation rate for 2021 could be double this.

The pandemic impacts the cost of living

According to the central bank’s latest Monetary Policy Report, inflation is expected to temporarily reach 4% in the near term. It notes that this rise largely reflects the impact of the pandemic as the economy recovers, which has led to higher energy and goods prices. However, the report adds inflation is projected to return close to the 2% target in the medium term.

The rate of inflation can seem small, even when it’s double the target. Yet, this can add up to more than you think and affect your short- and long-term finances. It means you could see your day-to-day expenses creep up in line with rising prices.

It works in reverse too and you can see the impact when looking at how the value of money has changed. Let’s say you had £1,000 in 2000. According to the Bank of England, in 2020 you’d need £1,721.35 to achieve the same spending power due to the impact of inflation.

So, inflation means your outgoings are rising, while some of your assets and income are gradually becoming less valuable. If you don’t consider inflation when financial planning, you could end up with an unexpected shortfall.

Retirement is a good example of this. If you set out the level of income you need at the start of retirement and expect to draw the same income for the rest of your life, you’re likely to find it’s not enough to maintain your lifestyle in your later years. You need to consider how the rising cost of living will affect the income you need.

Could rising inflation lead to interest rates rising?

Interest rates have been at record lows for 12 years. The Bank of England first slashed interest rates during the 2008 financial crisis, and has kept them low to support the economy ever since.

While no announcement has been made, the Bank’s latest report does hint that it would be willing to raise interest rates to reduce inflation if necessary. For some, it would be a welcome move, but it could cost others money.

For savers, rising interest rates could help their money keep pace with inflation. Current interest rates mean it’s likely that money held in a savings account has fallen in value in real terms over the last decade. An increase in rates could provide an opportunity for savings to grow in real terms.

For borrowers, it would mean outgoings rise further. The interest you pay on a mortgage, credit card, or loan, for example, will also rise if you’re on a variable rate.

Whether an interest rate rise is good for you will depend on if you’re a saver or borrower.

How can your savings beat inflation?

While rising interest rates could help savers maintain their spending power, it’s unlikely large rises will happen any time soon. It’s far more likely that the Bank of England will make gradual increases to the interest rate, and it could take years for it to be on par with the rate of inflation.

If you want to maintain or grow your spending power, your money will need to work harder. There are several ways of doing this, and, in some cases, investing your money can provide a solution.

Investing does come with risks, and values can rise as well as fall. However, historically, investment values have risen, despite short-term volatility, and it can be a way to increase the value of your money in real terms if returns outstrip the pace of inflation.

When investing, it’s important you set out what your goals are and consider your risk profile. You may be tempted to invest money held in your savings account, but if it’s part of your emergency fund, it should be readily accessible and investing likely isn’t the right option for you.

Whether you’re a professional or a retiree, inflation has an impact on your finances. If you’d like to discuss what you can do to manage the impact of inflation, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

An older couple and young woman smiling while sitting on a sofa

When you consider your financial plan, who do you involve? Often, it’s done independently or with a partner, but there could be advantages to making your wider family part of the process. If it’s not something you’re already doing, here are five reasons to involve children, grandchildren, and others in your plans.

1. It could encourage younger generations to consider their own financial plan

First, it could be beneficial to them. Being involved in your financial plan can mean they start thinking about their own long-term financial security.

While still working, it’s common not to think about retirement, even though the decisions professionals make, even early in their careers, can have an impact on the retirement they enjoy. Seeing the decisions you need to make about retirement and how to create an income could make them more engaged with the process and set them on the path to greater financial freedom. It could also mean they consider things they may have overlooked before, such as the need for financial protection, or when to choose investments over savings.

2. It can help you understand how to help your family reach their goals

You may know what your loved ones are hoping to achieve, but do you know the details? After talking through their goals, you may want to lend a financial helping hand and that could change your own financial plan.

According to an FTAdviser report, just 13% of parents over the age of 60 plan to pass on wealth to their children during their lifetime. However, in some cases, a gift now can have a far greater impact on their life than an inheritance will have.

Helping children and grandchildren to buy a home is a common example. With many of the younger generation struggling to save a deposit, a financial gift now could provide more security in the short and long term. If you knew this was a goal of your child, would you reduce their inheritance to provide a gift? By talking through their plans, you have an opportunity to understand how your wealth can have the greatest impact.

3. Discussing inheritances can lead to better financial decisions

The FTAdviser report found 72% of parents plan to pass on wealth to their children after their death. However, two-thirds said they rarely or never discuss inheritance with their children.

Talking about inheritance can be difficult and can bring up many emotions. Yet, it can help your loved ones plan their own futures more effectively. If they believe they’ll receive a greater inheritance than they actually will, they could be more reckless than they otherwise would be. Honest conversations about investment could also provide them with clarity and confidence about their future.

With more time to think about how they’d use an inheritance, your loved ones could make better financial decisions when they receive it.

4. It can improve your later-life plans and provide confidence in them

Later-life planning is an important part of creating a long-term financial plan. Yet, 4 in 10 parents have not discussed their later-life plans with their children. Again, it can be difficult to think about how your lifestyle and needs will change in your later years, but it is important.

It can provide both you and your children with greater confidence and ensure your wishes are carried out. The FTAdviser report highlights that a third of adults aged 30–59 with at least one surviving parent are worried about the prospect of managing the finances of their parents if they can no longer do it themselves. By involving them in the financial planning process sooner, they will be in a better position to make decisions on your behalf should they need to.

5. It can help you create an effective estate plan

Almost 80% of families do not have any estate planning strategy in place. Of those that do, less than half of parents said their children knew exactly what the plan was. An effective estate plan can help you ensure that loved ones benefit from your wealth when you pass away.

It may include discussing Inheritance Tax or how to make provisions for grandchildren who are too young to manage an inheritance themselves. Involving family in this process can help you understand concerns they may have and create a solution that suits your wishes.

If you’d like to involve your family in your financial plan, we can help. Whether you want to be open about the inheritance they can expect to receive in the future or get a better understanding of how you can financially support their goals, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

Close up of a hand holding a pen to paper

Half of the adults in the UK don’t have a will. While you may have a reason for putting the task off, there are many compelling reasons to make time to write a will that could provide peace of mind.

A survey from Will Aid found that 49% of UK adults do not have a will in place. A fifth said their reason for putting it off was because they do not want to think about death. While contemplating passing away is difficult, it is important to think about what you’d want to happen to your estate after you die.

Even if you have a will in place, you should regularly review it. Over time your wishes and circumstances can change. What you wrote 10 years ago may no longer align with your goals. Whether you’ve welcomed grandchildren, inherited money, or simply changed your mind, your will should reflect what you would like to happen to your estate. It’s a good idea to review your will every five years or after big life events.

If it’s something you’ve been putting off, here are five excellent reasons to make writing or updating your will a priority.

1. A will is the only way to ensure your wishes are followed

Without a will, your estate will be distributed according to intestacy rules. This can be very different from what you want, particularly if you have a complex family or want to leave something to several people. The only way to ensure your wishes are followed is to write a will.

2. You can use a will to name a guardian for your children

If you have children, you can use a will to name a guardian for them. Despite this, only a quarter of parents have named a guardian for their underage children in their will, according to Will Aid.

Without a named guardian, a court would decide who looks after your children. In some circumstances, this may not be who you wished and could even be someone your child does not know well.

3. A will can reduce family conflicts occurring

Grief can lead to family conflicts and has the potential to cause long-term disputes. In some cases, how your estate is distributed may be contested and it could cause rifts. This may be due to one person believing they know what you would want, which sharply contrasts with what another believes. Setting out your wishes clearly in a will can provide certainty and reduce the risk of family conflicts arising.

As well as putting a will in place, it may be worth speaking to your loved ones about your wishes too. This gives you a chance to help them understand why you may be making certain decisions.

4. You can leave a charitable legacy in your will

As well as leaving wealth to your family and friends, you may want to support a charitable cause too. Your will means you can leave a legacy to causes that are close to your heart. There are several different ways of doing this, from leaving a specific sum to charity to leaving a proportion of your estate. A legal professional will be able to offer advice on the different options you may want to consider.

As well as having a positive impact, a charitable legacy can also reduce a potential Inheritance Tax (IHT) bill. If you leave more than 10% of your estate to charity, the rate of IHT paid will reduce from 40% to 36%.

5. If your estate could be liable for Inheritance Tax, a will can reduce the bill

As well as leaving a charitable legacy, there are other steps you can take to reduce an IHT bill. Writing a will can help you maximise allowances so that you can pass on more of your wealth.

You can leave £325,000 to loved ones without any IHT being due, this is known as the “nil-rate band”. In addition to this, you may be able to take advantage of an additional £175,000 allowance known as the “residence nil-rate band”. You can use this if you leave your main home to your children or grandchildren. Naming your children or grandchildren in your will as benefactors of your home can increase the amount you can pass on without leaving an IHT bill.

Depending on your circumstances and goals, there may be other things you can do to reduce IHT. For example, placing some assets in a trust and passing these on through your will may be right for you. Keep in mind that trusts can be complex and often irreversible, so it’s important to take appropriate advice. If you’re worried about IHT, there are often steps you can take to reduce the bill.

If you’d like to discuss the value of your estate and how you can pass on assets to your loved ones, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate will writing, tax planning, or estate planning.

Have you thought about how you’ll pass wealth on to those who are important to you? Traditionally, this has been done through inheritance, but it’s becoming more common to gift during your lifetime.

Our latest guide explains why more families are choosing to gift during their lifetime and the pros and cons of each option. Whichever option you decide is right for you, our guide will enable you to fully understand your situation and make sure your wishes are carried out, and will explain everything from writing a will to calculating the long-term impact of gifting.

It can be difficult to think about how you’ll pass on wealth to loved ones, but it’s important to set out a plan.

Download Leaving an inheritance vs gifting during your lifetime to discover the steps you should take.

If you have any questions about passing on wealth, please contact us. 

A woman using a laptop while also checking her phone

When you think about what your most precious resource is, you might say money or even time. Yet an author recently proposed a different resource that you may be overlooking: your attention. With so many distractions in modern life, attention has become important. How often have you intended to focus on a TV show, but found your phone in your hand? Or put off your to-do list in favour of something that seems far more exciting?

Losing your attention can be annoying on a day-to-day basis. It may mean you don’t do everything you want or affect your enjoyment of activities if your mind is elsewhere. These distractions can add up and affect your longer-term plans and goals too.

Distractions have always had an impact, but today it’s far easier to distract yourself than ever before. All you need to do is pull out your phone to catch up on the news, scroll through social media, or even stream a film. And, of course, your phone isn’t the only distraction in your home. As well as material items, it’s just as easy for your mind to wander when you should be giving something your full attention.

There are many reasons for creating distractions. You may be putting off doing something or fear missing out. On top of this, we’ve become used to multi-tasking. While that can be useful in some scenarios, it can be a challenge to give something the attention it deserves.

5 ways to improve your attention

1. Pinpoint why you lose attention

Your first step should be to figure out why your attention slips. Is it because you’re worried about something or trying to put off a task? Knowing why you’re not giving something your full attention can mean you’re able to make a meaningful change.

2. Set out a to-do list

If you find distractions mean you don’t achieve everything you want, a to-do list can be incredibly helpful. It can help keep you on track and leave you feeling more accomplished at the end of the day. A to-do list may include things like completing work tasks or household chores, but, if you struggle to carve out dedicated time for the things you enjoy, make these part of the to-do list too. That could include spending time with your family without technology distractions or dedicating an hour to reading a good book.

3. Stop multi-tasking

When something is important to you, give it your full attention. Multi-tasking can seem efficient, but it can mean your tasks take longer or that mistakes are more likely to happen. If it’s something you’re looking forward to, multi-tasking can mean you don’t get as much out of it as you’d hoped.

4. Spend time exercising

If you struggle to concentrate, exercising can help you regain your focus. It doesn’t have to involve hitting the gym for a workout – even a walk around your local area can boost your attention span and mean you’re able to focus on the task at hand.

5. Practice meditation

Meditation is the practice of focused concentration where you focus on the now. Taking just five minutes a day to practice meditation can help you focus and improve your concentration by taking this mindset into other parts of your day. When you meditate, you don’t need to try and clear your mind, but rather pay close attention to the present moment, particularly your own thoughts and emotions.

How financial planning can help you focus on what’s important

While financial planning helps you understand your finances, it also involves spending time deciding what’s important to you. That may be spending time with your family, progressing your career, or travelling more. It’s a step that can provide some clarity about where your time is best spent and what to focus on.

Financial planning can also help your attention in another way, by giving you confidence in the future. If you’re worried about something or are uncertain about your future, it can affect your focus and even enjoyment. One of the biggest things families worry about is money. From whether you have enough in an emergency fund to cover the unexpected to planning for retirement, finances can be a cause for concern.

Financial planning can provide you with confidence that you’re taking the right steps to achieve your long-term goals, allowing you to focus on what’s important now. If you’d like to speak to us, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A family and a pet dog walking along a beach

Travel restrictions this summer mean more Brits have been choosing to book a staycation. The UK is filled with stunning destinations to explore, and you may be thinking about buying your own holiday home to escape to in 2021 and beyond. But with so many locations to consider, where should you search for the ideal property? Here are just five options that are worth thinking about.

1. Lake District

The Lake District is one of the most popular places to have a break in the UK, and for good reason. It’s the ideal place to head if you want to get away from day-to-day stress and get back to nature. Its abundance of water sports to try your hand at means it’s a great place for families and those that like to get active too. As it’s a national park, there are restrictions in terms of housing so finding the ideal property could be a challenge if you have a clear idea about what you want. If you decide that the Lake District is the right place for you, there are lots of picturesque towns to consider.

2. Cornwall

If your idea of a perfect holiday is to relax on the beach, Cornwall might just be the place to purchase a second home. Of course, there are opportunities to get out on the water and surf too. The beach isn’t all Cornwall has to offer either; there are plenty of historic sites to visit, including the famous Tintagel Castle that’s linked to the legend of King Arthur. If you’re buying a property in Cornwall you can choose to be close to the coast, a bustling town centre, or a rural location. St Ives and Padstow are great options for holiday homes, but you will pay a premium for a property. Other options to consider include Looe, Praa Sands, and Fowey.

3. South Wales

South Wales boasts a stunning, rugged coastline, as well as beaches to explore, making it an excellent place for a holiday home. With miles of hiking trails to walk along, it’s perfect for families that like to enjoy the great outdoors. You also have the Wye Valley, an Area of Outstanding National Beauty, as well as Cardiff, offering the best of both urban and rural places to visit. Average house prices in South Wales have exceeded national growth in the last year but are still priced below the national average, so you could get more for your money here.

4. London

If you prefer the hustle and bustle of city life, London has a lot to offer. From shopping to the theatre and plenty of museums, London has enough attractions to keep you entertained, however often you visit your holiday home. If you want to escape for the day, there are lots of day trips options too, including Bath, The New Forest, and Oxford. Of course, choosing a holiday home in the capital comes with a price tag. The average home in London is over £500,000.

5. The Scottish Highlands

If you really want to escape from a hectic schedule and urban life, the Scottish Highlands is ideal. From the mountains to the sea, you’ll be surrounded by beautiful landscapes and stunning castles. If you enjoy the outdoors and nature, there are lots of remote locations to choose from. But, if you prefer to have the amenities of a town or city, you’re also spoilt for choices, from Inverness to Fort William. There’s a huge range of properties to suit all needs too.

What you need to know if you need a mortgage for a holiday home purchase

If you’ll need to take out a mortgage to purchase a holiday home, the basics work in the same way as a traditional mortgage. However, there are a few key differences to keep in mind:

  • You will usually need a deposit of at least 20% for a second mortgage. The more you can put down, the more competitive the deals you’ll have on offer.
  • The lender will calculate affordability based on your income and outgoings. If you’re still paying the mortgage on your main home, this will affect the amount you can borrow.
  • Lenders will assess your track record of repaying your mortgage on your main home when reviewing your application.
  • As this will be a second property, you will need to pay a 3% Stamp Duty surcharge, which can increase costs significantly.

If you hope to let the property out, you’ll need to use a holiday let mortgage, which is a special type of buy-to-let mortgage.

Comparing mortgage deals can be time-consuming and confusing. If you’re ready to buy a holiday home, we’re here to help you find the right mortgage deal for you. Please contact us to discuss your needs.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Hand holding house keys

When you submit your mortgage application, it can be a nerve-wracking experience. Being rejected by a lender could mean you lose the house you’ve put an offer on. Understanding what banks and other lenders are looking out for can give you confidence when you submit your application.

As a first-time buyer, one of your first steps should be to understand how much you’ll be able to borrow. This can help you set a target for your deposit and search for a property that’s within your budget. Many things can affect how much you’re able to borrow. As a general rule of thumb, you can borrow 4.5 times your annual income.

Applying for a mortgage in principle, which will usually not affect your credit score, can give you an idea of whether a lender would accept your application and the amount they would lend. But keep in mind this isn’t a guarantee. If you’d like some help applying for a mortgage in principle, and the rest of the house buying process, please contact us.

Why having confidence in your mortgage application is important

Once you’ve saved a deposit and found the home you want to buy, having confidence that your mortgage will be approved is important.

A rejection can slow down the process and it could even harm your chances of being approved by another lender. This is because the lender will carry out a hard credit check, which will show up on your credit report. This could put off other lenders and make it more challenging to get the money you need to buy your first home.

So, what does a mortgage lender look for?

1. Income and affordability

One of the key things a mortgage lender will look at is simply whether you can afford to keep up with the mortgage repayments. As well as looking at your income, they’ll also assess your outgoings and what your existing financial commitments are. As a result, you’ll probably need to provide payslips covering several months, information of any benefits you claim, and bank statements.

2. Payment history

Your credit report shows your payment history, from your mobile phone to utility bills. If you’ve paid late or defaulted in the past, it could have an impact on their decision. If you have missed payments, it doesn’t automatically mean your application will be rejected, but you may need to approach specialist lenders or be prepared to accept a higher interest rate on your mortgage as a result.

3. Stability

Lenders want a borrower to be stable, indicating that they’ll be able to meet mortgage repayments over the long term. There are several things they may look at, including whether you’re registered in the electoral roll at your current address and how long you’ve been in your job. Mistakes can occur on your credit report, so it’s worth checking that your current and previous addresses are correct. Rectifying mistakes on your credit report can provide an easy win when looking for ways to boost your credit score.

4. Credit utilisation

How much of your available credit are you currently using? Having too much debt could put off lenders as it means your financial commitments are likely to be higher and could indicate that you need to borrow to get by. Generally, it’s recommended that you keep your credit utilisation below 30%.

5. Red flags

As part of the application process, you’ll usually have to provide bank statements to demonstrate your income and outgoings. When reviewing these, lenders will keep an eye out for red flags that could lead to your mortgage application being rejected. Frequent outgoings to gambling firms or deposits from payday lenders, even if the balance is repaid on time, could harm your plans. It’s worth being more cautious with your spending than normal in the months leading up to submitting a mortgage application.

Keep in mind that it’s not just your finances a lender will look at, but the property too. If the lender doesn’t believe the property is worth the amount you’ve offered for it, they may reject your mortgage application based on this. With a fast-moving property market, it can be tempting to increase your offer, especially if other buyers are interested. Before going above the asking price, take a look at what other properties nearby have sold for and be cautious.

Helping you find the right mortgage for you

There are lots of different mortgage lenders to consider, some of which don’t have a high street presence. Lenders set their own criteria and it can be difficult to know whether your mortgage application has a good chance of being approved. This is where we can help. We’re here to help you find a mortgage that matches your needs and offers a competitive interest rate to save you money. If you’d like to discuss buying your first home, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Silhouette of mother kissing her son on the head

The Independent reports that 76% of parents and guardians in the UK are saving money for their children under the age of 18. Helping your child step into adult life with some savings could prove vital for their mental wellbeing and financial stability and could help them further down the line.

But, of those saving, 83% do so exclusively in cash. While perhaps the easiest and simplest option, it may not be the best way to generate a nest egg for your child. In an environment of low interest rates and rising living costs, the cash you have saved now will likely not have the same value in 5-, 10-, or 15-years’ time.

One alternative to saving in cash is to invest your money. Making an investment may seem daunting, but it could prove to be the most efficient way to save for the future. Read on to find out why investing your money might be the best way to save for your children.

Inflation reduces the value of cash over time

The purchasing power of your savings will reduce over time thanks to inflation. Inflation represents the average rise in the prices of goods and services and stands at 2.5% as of June 2021 when compared to a year earlier. Simply put, something that cost £100 in June 2020 cost £102.50 in June 2021.

If the money you are saving for your child is kept in a savings account, you may gain a little interest on the amount, but it’s unlikely to keep up with inflation.

As of the start of August 2021, Moneyfacts states that the junior savings account with the highest interest rate pays an Annual Equivalent Rate (AER) of 3%. This is the only account that pays a rate that beats the rate of inflation. If your money is in any other account, it’s likely losing money in real terms.

Saving for your children is a long-term project as you’re likely to be putting money aside for 10 years or more. Because of this, it could be worth investing your money for better returns.

Investing could provide higher returns than savings accounts, but it isn’t without risk

As interest rates are so low, if you’re setting money aside for a period of five years or more, it could pay to invest the cash instead.

Online investment manager Nutmeg looked at available market data between January 1971 and May 2020 and found that long-term investing dramatically increases your chances of returns.

For example, investing for one day during that period gives an investor a 52% chance of generating a profit, but investing for 10 years raises this to 94%.

And the longer you’re invested, the better. Nutmeg found that “an investor that invested in the stock market for more than 13 and a half years at any point between January 1971 and May 2020 never lost money.”

In a 2020 blog, Financial Expert reported that if you had put £1,000 in a 2% interest savings account in 2010, that money would have been worth £1,148 in 2020. However, if you had invested £1,000 in the FTSE 100 in 2010, that money would have been worth roughly £1,579 in 2020.

However, returns cannot be guaranteed, and all investments carry some level of risk. Investment values can fall as well as rise. It’s important to weigh up the risks when making investment decisions. If you have any questions, we’re here to help.

A Stocks and Shares Junior ISA is a tax-efficient, hassle-free investment opportunity

There are a few ways to go about investing for your children. One of the most tax-efficient methods is through a Stocks and Shares Junior ISA (JISA), where you don’t pay Income Tax or Capital Gain Tax on your returns. When you contribute to a Stocks and Shares JISA, your money is typically invested in a range of assets across the globe, from shares to government bonds.

You can contribute up to £9,000 into a JISA in the 2021/22 tax year. Remember that the money cannot be accessed before your child turns 18 and your returns will be based on the performance of the underlying investments.

Research from Schroders, published by City AM, show that saving money into a Cash ISA between 2000 and 2018 returned four times less than a Stocks and Shares ISA. However, remember that the past performance of an investment is not necessarily indicative of the future.

Investing could help you build up a bigger nest egg for your child

If you’d like to see the money you’ve worked hard to save for your child increase faster than the rate of inflation, saving in cash may not be the best idea. Though riskier, investing your money may generate higher returns.

While it is important to remember that the past performance of a stock is not indicative of the future, stock market investments tend to outperform cash savings accounts in the long term.

The method of saving that you choose should be personal to you depending on your situation, so be sure to contact us and speak to a financial adviser when weighing up your options. We can help plan for you and your children and come to a decision on the best course of action for your situation.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance

iPhone 7 screen with TikTok and Instagram apps in the corner

Financial advice is a complex topic and often requires a professional planner to get right. The very idea of seeking it can seem daunting, with many people unsure of where to start or who to go to.

A recent trend has seen an increase in the viewership and production of content on social media that gives various forms of financial advice.

CNBC report that nearly half of teenagers are learning about investing from some form of social media. The trend, which is especially prevalent on TikTok and Instagram, is thought to have been partly linked to the GameStop saga in January 2021.

Since the events in January, the subreddit responsible (r/WallStreetBets) now has a userbase of more than 10 million, more than double what it was at the start of 2021. Investment News report that TikTok videos tagged with “#personalfinance” have accumulated a total of 3.5 billion views.

But with TikTok themselves banning the promotion of various financial services on their platform, and warning users over taking any financial advice on social media, is taking such advice really such a good idea?

Social media financial advice does have some positives

The very nature of social media is that it is public domain and, thus, freely accessible. This also means that any available information on social media is typically broken down and easy to understand.

For a younger audience, this is especially important, as the world of finance is complex at the best of times. Social media allows for small, easily digestible chunks of information to be delivered in a snappy video format, which is usually more memorable than learning it from a book or newspaper.

It fills a void that is typically left empty throughout the education system. According to the Young Persons’ Money Index 2021-21 from the London Institute of Banking & Finances, just 8% of young people said they learned the most about money skills in school, as opposed to learning from their parents or their own experiences. 83% of students said that they wanted to learn more about money in school.

These informative videos can then act as building blocks from which a substantial amount of knowledge can be added with further research. In developing this knowledge of finance, it may spark an interest or make someone consciously aware of how important financial decisions are.

At the very least, even if the advice or information isn’t entirely accurate, it spreads awareness of the importance of your financial wellbeing. It may prompt an individual to review and understand their own financial situation or seek out professional financial advice.

You should always be careful when following advice from social media

Financial or otherwise, social media advice isn’t known for its reliability. First and foremost, the easy-to-understand nature of information provided tends to mean that a topic’s complexities have been removed.

This could prompt you to make a financial decision or investment without the necessary knowledge to do so. Not only is it important to know the intricacies of every decision when your finances are involved, but it’s also vital to understand how it will affect your personal situation.

No two people are in the same situation with their finances, so it’s important to distinguish when a piece of advice may not be relevant or beneficial for you. General advice, when not tailored to your needs, may end up hurting your finances.

Also, it is impossible to verify the credentials of an individual on social media. There is no way to prove that the person you are watching is actually qualified, or even knowledgeable on the subject that they give advice on.

Compounding this is that social media is often riddled with sponsorships and product placements. It won’t take long to find a TikTok that recommends a certain investment platform or service thanks to a paid promotion.

In this case, the content creators giving these endorsements may not even believe in their own advice. This may make it difficult to determine what services are genuinely recommended and worthwhile, and which have simply paid to be promoted.

Lastly, and perhaps most importantly, social media is an international medium for communication. Why is this important? Because every country has completely different rules, laws, and regulations when it comes to finance.

Each country operates with vastly different levels of Income Tax and Corporation Tax. They may use different methods of financial regulation or have different options for financial protection. Advice that may be relevant to an American audience may be incorrect and even harmful for UK and other international viewers. Tax allowances, restrictions, and payments will vary hugely.

As a simple example, a basic-rate taxpayer in the UK will pay 20% tax. In the US, the federal tax rate is 10%, with the other various factors possibly increasing this number. Taking the advice of an “adviser” who is based outside of the UK could be dangerous, since their country and yours may operate differently.

Social media is great for raising awareness…

… but maybe not too much else. At the very least, if you plan on taking the advice of a social media influencer, be sure that you are aware of all the possible associated risks. Be sure to consider any legal differences if they are based internationally and do your research to make sure they are qualified, and that their advice is correct.

It’s undeniable that social media has raised the awareness of the importance of personal finance among the younger generation. Awareness, however, does little if you don’t understand the complexities around finance.

If you are seeking financial advice but you are unsure where to start, consider speaking to a financial planner before heading to social media. Not only can they provide professional, relevant advice for your personal situation, but they can also advise you of any risks involved with the process. If you’d like to discuss your finances or have any questions, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.