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.

Senior couple sitting in a colourful park

From ditching the car to recycling your waste, you probably take a range of steps to help protect the environment and our planet. As the world slowly moves towards sustainable, green energy, perhaps you want to do even more to help fight climate change?

You might think you’re doing everything you can to go green, but did you know that you can help the environment with your pension? By investing your pension into a sustainable, or ethical fund, you could significantly reduce your impact on the environment.

The Financial Times reports that a pension worth £100,000 invested in a sustainable fund could be the equivalent of taking five or six cars off the road a year.

Ethical pensions have recently risen in popularity, alongside many other funds with a focus on ESG principles. ESG stands for “environmental, social, and governance”, which cover some of the factors sustainable portfolios may consider, alongside financial factors, when making investment decisions. And investing through ESG funds doesn’t mean your investments will yield lower returns either.  

Read on to find out more about sustainable pensions.

Switching to a green pension could be 57 times better for the environment than going vegan

With the power to tackle climate change by simply switching your pension, there’s no need to drastically overhaul your lifestyle.

As Pensions Age report, your pension pot alone could do more for the environment than 57 people switching to a vegan diet. In fact, a sustainable pension could be 21 times more effective than giving up flying, becoming vegetarian, and switching to a renewable energy provider combined.

They even claim that a sustainable pension could be 20 times better for the environment than switching to an electric car, which is already one of the other most effective methods of tackling climate change.

Euronews reports that transitioning an average-size pension pot (around £30,000) to a sustainable pension could reduce as much as 19 tonnes of carbon emissions a year.

If you have a pension pot of £100,000, you could be cutting as much as 64 tonnes of carbon emission each year. That is the equivalent of nine years’ worth of the average citizen’s carbon footprint.

A sustainable pension is a way to fund ideas you believe in

Which? states that there is an estimated £3 trillion in UK pensions that are used to fund everything from wind farms to essential government services. However, only 22% of pension holders know the types of company that their pension is invested in.

A sustainable pension avoids putting your investments into certain companies, depending on the policies of the specific fund you choose. For example, they may not invest in the assets of oil companies and instead invest in electric motors.

If you don’t like the thought of your money going towards tobacco producers, weapons manufacturers, or high-emission companies, a sustainable pension may be right for you.

From climate change, to education, and gender equality, there are plenty of options for your investment. After all, the main goal of an ESG pension is to represent the views of those invested in it.

A significant number of pension providers have announced their plans to make their default pension services have net-zero carbon emissions by 2050. For some providers, this is the goal with their entire portfolio.

Investing in a sustainable pension helps both your future, and the planet’s

One concern is that there is too much focus on sustainability instead of profitability. With more than 200 pension funds already being labelled as “sustainable”, do they really perform as well as those without such a strict focus?

The data suggests that yes, they do. Which? reported the findings of a Morningstar analysis, which found that three-quarters of ESG funds performed above average when compared with similar, standard funds.

They may also provide greater longevity and security, as 77% of ESG funds available from 2009 were still going in 2019. This is compared to just 46% of non-ESG funds.

The pressure of well-performing ESG funds is also encouraging firms to improve their pension policies. The more sustainable pensions that are made available, the more widespread the positive impact.

Sustainable pensions are a step forward

It is no doubt that sustainable pensions are a step forward. Switching to a sustainable pension is a great way to help support ideals that you believe in while also supporting yourself in later life.

A sustainable pension fund invests in the ideas you believe in. And, with the returns often just as positive as traditional pension funds, sustainable funds provide a beneficial alternative for pension contributors.

Are you interested in learning more about sustainable investments? We’re here to help you understand how ESG factors can be incorporated into your portfolio.

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

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Father and son reading a book together on a sofa

Read a Book Day on 6 September offers the perfect opportunity to curl up with a book and escape, whether with a comforting favourite or a new adventure. It’s also a great time to share a book with your child or grandchild and instil a love for literature in their early years.

Developing a love for reading can be hugely beneficial to children. It’ll help improve their vocabulary and language skills, learn more about the world around them, and develop their imagination. There are shelves filled with wonderful books for you to enjoy together, including these 10 chapter books.

1. Fantastic Mr Fox by Roald Dahl

Join a group of woodland animals led by the cunning Mr Fox as they try to stay one step ahead of three greedy farmers. Despite being published more than 50 years ago, this Roald Dahl novel has become a staple of children’s literature thanks to the creative story and writing style the author has become well-known for. Of course, once you’ve finished Fantastic Mr Fox, you’ll need to decide which of Roald Dahl’s books to pick up next, from Matilda to The BFG.

2. A Really Short History of Nearly Everything by Bill Bryson

Perfect for inquisitive young minds, Bill Bryson’s adapted his popular adult book for children. Filled with vibrant illustrations, it explores the history of science, from the big bang to the dawn of modern science. Answering questions about space, dinosaurs, and everything in between, this book is a great place to start for children with an interest in science and you might learn something new too.

3. Holes by Stanley Yelnats

Holes has sold millions of copies worldwide since its release in 1998 and it’s a compelling read for children. When Stanley Yelnats is sent to Camp Green Juvenile Detention Centre, he’s told to dig a hole every day as part of a character-building exercise, but what is the real reason for the holes? You’ll want to find out just as much as the child you’re reading with.

4. Charlotte’s Web by E. B. White

Charlotte’s Web has consistently been named a favourite children’s book since it was released in 1952. It tells the story of a pig named Wilbur and his friendship with a spider, Charlotte, as they come up with a plan to keep Wilbur away from the chopping block. The beautifully written and at times humorous story more than deserves its classic status.

5. Harry Potter and the Philosopher’s Stone by J. K. Rowling

Harry Potter has become one of the most popular children’s books ever, and Harry Potter and the Philosopher’s Stone takes you right to the start of the magical story filled with dragons, gnomes, quidditch, and evil wizards. Follow Harry as he starts his journey, but you may become so hooked you’ll finish all seven books in no time.

6. Stormbreaker by Anthony Horowitz

Action-packed and filled with gadgets, the Alex Rider series is James Bond for children. The first in the series sees teenage spy Alex sent to investigate Herod Sayle, who is offering state-of-the-art computers to every school in the country but this offer seems too good to be true. Once again, there’s a whole series to enjoy if your child gets caught up in the thrills and challenges of carrying out an MI6 mission.

7. Murder Most Unladylike by Robin Stevens

For budding detectives, Murder Most Unladylike is the first in a series that follows two girls at boarding school in the 1930s as they hunt for crimes to solve. When they find a body that disappears, they need to hunt for the killer before they strike again. Could they be out of their depth? With several in the series already written, detective duo Daisy and Hazel have plenty of adventures to take your child on.

8. Tom’s Midnight Garden by Philippa Pearce

First published in 1958, Tom’s Midnight Garden has become a classic read for children and a fantastic book to share. Stuck at his aunt and uncle’s house, Tom resigns himself to a long, boring summer, until he realises the grandfather clock strikes 13. As he discovers a secret garden filled with intrigue, you’ll find a magical story that’s become one of the best-loved children’s books.

9. The Graveyard Book by Neil Gaiman

Neil Gaiman’s wonderfully imaginative books delight children and adults alike, and The Graveyard Book is a great place to dive into his collection. It’s a gothic book perfect for kids that want to read something a little darker. It tells the story of Bod, a baby that escapes a murderer intent on killing his family. Brought up by the ghosts and ghouls of the local graveyard, will he survive as the murderer continues to hunt for him?

10. Attack of the Demon Dinner Ladies by Pamela Butchart

Perfect for fans of Diary of a Wimpy Kid, this book is silly and laugh-out-loud, guaranteeing a lot of fun as you read it with your child or grandchild. Izzy and her friends have always hated school dinners but now there’s something different about the dinner ladies and they’re about to attack. Fans of the book will be pleased to know there are plenty of others in the series to pick up, including The Spy Who Loved School Dinners and My Headteacher is a Vampire Rat.

Desk filled with paperwork and tablet that says “mortgage”

Low interest rates have made borrowing money cheaper than ever, but interest rates could start to rise in the next 12 months. If you’re paying off a mortgage, it could affect your outgoings and the full cost of borrowing.

We’ve experienced over a decade of very low interest rates. That’s been good news if you’re borrowing but has negatively affected savers. However, this could change as the economy begins to recover from the effects of the pandemic.

The Bank of England (BoE) first cut interest rates to record lows following the 2008 financial crisis as a way to support the economy during the recession that followed. In November 2017, the rate was increased from 0.25% to 0.5% and increased again to 0.75% in August 2018, suggesting the central bank would gradually raise rates to “normal” levels. However, this was reversed as the extent of the Covid-19 pandemic became known in 2020.

In March 2020, the BoE made two interest rate cuts and the rate has stood at an all-time low of 0.1% ever since. This cut has played a role in keeping the economy afloat during the uncertainty caused by the pandemic. 

Record growth forecasts could lead to an interest rate rise

At the last BoE meeting in June 2021, the Monetary Policy Committee voted to keep interest rates at 0.1%.

However, the BoE also forecasts that the UK will experience its fastest period of growth in over 70 years in 2021. According to a report from the BBC, the economy is forecast to expand by 7.25% this year, although this follows the biggest contraction in 300 years in 2020.

The economy bouncing back is likely to mean the BoE will not introduce negative interest rates, which were being discussed. It also suggests that interest rates will start to rise in late 2021 or 2022. Any rises announced are expected to be gradual, so it’s unlikely we’ll return to “normal” interest rates any time soon. Yet even a small change in interest rates can have a significant impact on borrowers.

The impact of an interest rate rise on your mortgage

A mortgage is often the largest form of borrowing anyone takes out. As the amount borrowed is large and is usually paid back over decades, a change in interest can mean buying your own home becomes far more expensive.

Let’s say you borrow £200,000 to buy your home and have a mortgage term of 25 years, the table below highlights how a change in interest affects your monthly outgoings and the overall cost of borrowing.

Interest rateMonthly repaymentTotal repaid
2%£848£254,357
3%£948£284,478
4%£1,055£316,570
5%£1,170£350,882

Source: Money Saving Expert

When you first think about it, the difference between 2% and 5% may seem relatively small, but the compounding effect on interest means it adds up. Over the full term of your mortgage, you’d pay almost £100,000 more in interest if your mortgage rate was 5% rather than 2%. With interest rates expected to increase, it’s important you understand the impact it could have on your finances and the cost of borrowing.

If interest rates begin to rise, whether you’re affected will depend on the type of mortgage you have:

  • Tracker mortgage: This type of mortgage tracks the BoE’s base rate. So, if the central bank increased the interest rate, your mortgage’s interest rate would rise by the same amount.
  • Variable mortgage: A variable mortgage works in a similar way to a tracker mortgage. However, it follows the rate set by your lender rather than the BoE. If the base rate increased, it’s likely your lender would also increase their rate.
  • Fixed mortgage: With a fixed mortgage, your interest rate is fixed for a defined period. If interest rates changed, this wouldn’t affect your mortgage until your existing deal comes to an end.

So, is it time to fix your mortgage interest rate?

If you choose a fixed-rate mortgage, your outgoings won’t be immediately affected by rate rises. With interest rates low, fixing the rate now could make sense and save you money. However, if rates didn’t rise or even fell, you’d end up missing out. With no guarantees, it can be difficult to know what to do.

Don’t rush into choosing a mortgage. It can have a huge impact on your finances and it’s worth taking some time to consider. It’s not just the interest rate that’s important either. Depending on your circumstances things like being able to overpay or port your mortgage to a new property can be valuable.

If your current mortgage deal is coming to an end, please contact us to talk about your needs and to find the right mortgage for you.

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

Classic wooden handle umbrellas hanging up

September will mark the first Income Protection Awareness Week. Income protection can provide financial security when you need it most, but it’s often something that’s overlooked. If you recognise these five scenarios, it may be worth looking at how income protection could fit into your wider plans.

1. Your employer doesn’t offer sick pay

It’s worth looking at the benefits your employer offers when weighing up the pros and cons of income protection. You should check what your employer’s sick pay policy is and how long it lasts.

Many employers offer an enhanced sick pay policy that means you’d continue to receive an income in the short term if you were unable to work. However, it’s worth noting that these policies rarely go beyond 12 months. So, an income protection policy with a long deferment period may still be beneficial.

If your employer doesn’t offer sick pay, you will usually receive Statutory Sick Pay (SSP) if you need to take time off. SSP pays £96.35 each week in 2021/22 up to a maximum of 28 weeks. Relying on SSP alone can mean you face serious financial difficulties if your income did stop due to illness.

2. You are self-employed

If you’re self-employed, taking time off work can have a huge impact on your income and may even affect long-term projects. It may mean you’re tempted to work despite being ill or that you rush back too soon without giving yourself enough time to recover. Receiving a reliable income through an income protection policy means you can focus on your health without having to worry about financial security.

3. Your emergency fund wouldn’t cover essentials

If you have to rely on your emergency fund, how long would it last? An emergency fund is an excellent option for providing short-term financial security if the unexpected happens. This money should be readily accessible and ideally cover three to six months of expenses.

If your emergency fund wouldn’t be enough to provide peace of mind, income protection could help.

While your emergency find may provide security for a few months, if a long-term illness affected you, you could still find that you face financial insecurity. Again, income protection with a long deferment policy can give you confidence while reducing premiums in this case.

4. Your salary is the main income source for your family

Your income may be essential for your family’s finances. If you have dependents, taking additional steps to ensure financial security if the unexpected happens becomes even more important. Losing income even for a few months could mean significant lifestyle changes for your family and may affect long-term prospects if you’re forced to dip into savings.

5. You don’t have any passive sources of income

If you have a passive income, such as from investments or rental properties, you may be able to cover the essentials and maintain your lifestyle without your salary. However, if your entire income relies on you being able to go to work, it’s worth thinking about how income protection could provide certainty.

How much does income protection cost?

Income protection will pay out a regular income if you’re too ill or injured to work until you can return, retire, or the policy ends. It can be difficult to put a value on that, but often income protection is cheaper than you think.

Many things will influence the cost of income protection. This includes decisions you make when selecting a policy, like the level of cover you want or how long you’ll need to wait before making a claim. Your health and lifestyle can also have an impact, from your age to whether you smoke. As a result, it’s important to receive quotes that are tailored to you but don’t simply dismiss income protection as expensive.

As with all financial decisions, you need to consider if income protection is right for you. Spending some time contemplating how you’d cope financially without your income can help you assess if income protection can add value to you. If you’d like to discuss whether it makes sense for your circumstance or need help choosing an appropriate income protection policy, 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.

Pink piggy bank on a wooden table

New research from the Yorkshire Building Society has revealed that a huge number of Britons are alarmingly unprepared for financial trouble. Around 14 million Brits have less than £500 in savings, with more than 70% admitting to having less than £100 saved up.

Perhaps more worryingly, the number of Britons with no savings at all has nearly doubled since 2019. Though it can be difficult to save, especially during the turbulent times of the pandemic, it has never been more important.

Not only does an emergency fund provide a safety blanket for financial surprises, but it can also help to reduce stress levels and improve your mental wellbeing.

There’s a lot to worry about in life, so knowing that you’re prepared for a financial emergency can take a huge weight off your shoulders.

Continue reading to see what an emergency fund is and why it’s vital to have one.

An emergency fund gives you peace of mind when the unexpected happens

An emergency fund is a separate stash of money reserved for life’s many unexpected expenses. Unfortunately, there’s no easy way to predict the future and the costs it may bring with it.

You might feel like you’re prepared for anything but, if your savings aren’t quite up to scratch, you could find yourself in a difficult situation. From your boiler breaking down to a leaky roof, having an emergency fund could be vital for maintaining financial stability.

While the amount you need in your fund will depend on your specific circumstances, most experts suggest having around three to six months’ salary saved in a dedicated account.

The pandemic has demonstrated just how uncertain life can be. As many businesses struggled, perhaps your income suffered as a result, or you were forced to take an extended period of sick leave? Worse still, perhaps your household lost a source of income?

With so many Brits struggling financially, it can be difficult to build up the necessary savings to cover these costs. Here are a few ways that could help you bolster your emergency fund.

5 easy ways to boost your emergency fund

1. Understand your budget and be strict with it

Breaking down exactly what’s coming in and going out each month is vital. While a mortgage and some bills are typically fixed, essential expenses like food and travel can fluctuate. Being tough on yourself is the first step towards saving.

You could look to implement a budgeting method. One of the most popular of these is the 50/30/20 rule, which aims to guarantee a decent amount of saving per month. This method sets a limit on what percentage income you should be spending on different things.

Of your post-tax income, it suggests that you should spend:

  • 50% on essentials, such as housing, food, and bills
  • 30% on wants, such as dining out and personal treats
  • 20% on savings contributions or paying off any debt.

If you don’t think the above method is quite for you, try researching other budgeting methods to find a better fit. There are plenty of suggestions to help you no matter your financial situation.

2. Pay yourself first

It could be beneficial to consider “paying yourself first”. In other words, contribute towards your savings immediately when you receive your earnings and spend what’s left over.

This way, you’re guaranteed to make meaningful contributions to your emergency fund and any other savings you have.

3. Keep your emergency fund in a separate account

By keeping your savings and spending money separate, you might find that you’re less likely to break step one and go over budget.

Keeping your fund in a separate account earmarked for emergencies means you’re less likely to dip into it for everyday expenses or even treats.

4. Cancel direct debits

Check your bank statement and read through all your direct debits from last month. Cancel the gym membership you haven’t used since lockdown began and stop giving your money to the magazine you’ve yet to read.

It could also be worth double checking any annual payments you may be making, as these are harder to catch on your statement. Over time, these savings can add up – it’s all money you can redirect to your rainy day fund.

5. Make sure you’re maximising the returns on your money

With interest rates at record lows, it can pay to shop around when it comes to saving.

Many accounts now pay a fraction of 1%. For example, the National Savings & Investments “Investment Account” account pays just 0.01% interest – that’s just £1 a year for every £10,000 saved.

To get the most from your emergency fund, make sure you regularly check that you’re getting a competitive return. Boosting your interest rate improves your returns which, over time, can compound into a significant sum.

If you haven’t maximised your ISA subscriptions for the year, keeping your emergency fund in a Cash ISA could be beneficial. Any interest you earn will be paid free of tax, and many Cash ISAs offer instant access to your funds when you need them.

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

Pile of cryptocurrencies with Bitcoin in the middle

Ownership of cryptoassets is rising among UK investors and, while still relatively new, they are growing in popularity. But before you purchase crypto, it’s important to understand what the term means and if they have a place in your portfolio.

According to the Financial Conduct Authority (FCA), 2.3 million adults now hold cryptoassets, compared to 1.9 million last year. Awareness has also increased, with almost 8 in 10 adults having heard of cryptoassets. However, the findings also suggested many people don’t fully understand what “crypto” means. Only 71% of those that have heard of cryptoassets correctly identified the definition of “cryptocurrency” from a list of statements.

What does “cryptoasset” mean?

Cryptoasset is a term used for digital assets that use cryptographic techniques – a method of protecting information through codes – to verify transactions. Cryptocurrency is one of the most popular types of cryptoassets and bitcoin is among the most well-known. Much like other assets, you can buy and sell cryptoassets. As the value changes over time, you can make or lose money.

Bitcoin has famously increased in value over the last decade, but it’s also important to note that it’s experienced periods of volatility and some investors have lost money. Cryptoassets are considered very high-risk, speculative investments. As a result, they’re unlikely to be suitable for the majority of investors.

Despite this, only 1 in 10 people who had heard of cryptoassets said they were aware of consumer warnings. And just 43% said these warnings discouraged them from investing.

The FCA research also found 12% of people who had already purchased cryptoassets were not aware the assets were not protected. 

Sheldon Mills, FCA’s executive director, consumers and competition, said: “It is important for customers to understand that because these products are largely unregulated that if something goes wrong, they are unlikely to have access to the Financial Services Compensation Scheme or the Financial Ombudsman Service. If consumers invest in these types of products, they should be prepared to lose all their money.”

If you’re thinking about investing in cryptoassets you should keep in mind:

  • Cryptoassets are high risk, and you could lose all your money.
  • The performance of cryptoassets is volatile.
  • Most crypto exchanges and assets are not regulated, so you aren’t protected.
  • Converting cryptoassets back into cash can be difficult and will depend on market conditions.
  • Fraudsters use a lack of awareness about cryptocurrency, so be cautious of guaranteed or high returns, or time-sensitive offers.

What’s enticing people to buy cryptoassets?

There are many reasons why people may be thinking about investing in cryptoassets. For a small portion, it may make sense for them financially and be in line with their risk profile.

However, previous FCA research has indicated that some investors are getting involved in high-risk assets even though they’re not suitable for them. Some 6 in 10 investors in these assets said a significant investment loss would have an impact on their lifestyle. Among the reasons for investing were emotions and the thrill of it, as well as the social status that it can deliver.

The FCA commented: “This is particularly true for those investing in high-risk products for whom the challenge, competition, and novelty are more important than conventional, more functional reasons for investing like wanting to make their money work harder or save for their retirement. 38% of those surveyed did list a single functional reason for investing in their top three.”

So, if you’re thinking about investing in cryptoassets, it’s also important to think about the reason why.

Your goals should always play a key role in your investment decisions. Investments also need to reflect your wider circumstances. If you’re investing for retirement and may not reach your goals if you lost money, cryptoassets are not likely to be the right option for you. However, if you have spare money that you’d like to invest to enhance your retirement lifestyle, but losing it would not impact your financial security, higher-risk investments may be an option worth considering.

Remember: investing is a marathon, not a sprint. You should always invest with a long-term outlook. While the movements and fast rises of some cryptoassets can seem attractive, their value can fall just as fast and it’s the overall trend you should focus on.

If you’d like to discuss your investments and what opportunities make sense for your goals, 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.

Close up of someone walking through a city in the sunlight

Financial planning is about much more than simply growing your wealth. Not only can it reduce financial worry, but it can help you achieve long-term goals, reduce stress levels, and increase your mental wellbeing.

Perhaps you feel like you don’t have enough time to spend with those you love? Or maybe you’re striving for early retirement but you’re not sure how to get there? Financial planning exists to guide you through these issues with confidence.

Pandemic burnout and the increased work week

Covid-19 has influenced almost everything since early 2020. The Guardian reported earlier this year that UK workers have increased their working week by 25% since working from home.

In the UK, the average time spent on a business network each day increased from 9 to 11 hours. However, employees aren’t the only people affected; two in five company owners reported struggling with depression, anxiety, or exhaustion in 2020 and early 2021.

Not only have people been working longer hours, but now the line between work and leisure has blurred. Many people have complained of an inability to switch off after a workday.

Financial planning could help to strike a much-needed balance between work and life. But how?

Helping you strike a better work-life balance

Often, financial planning is associated with building wealth. While this may be part of the process for some people, it’s not always the case. Financial planning focuses on how to help you achieve your goals.

If you’re in a position where you want to start cutting back working hours or taking other steps to achieve a better work-life balance, financial planning can help you understand what your options are. By looking at what is most important to you, a bespoke financial plan could give you the option to reduce how much time you spend on work. In some cases, this may include cutting back on outgoings, depleting wealth, or adjusting other steps you’ve been taking.

Rather than assessing how much money you have, the process of financial planning is about understanding what makes you happy and how money could you achieve these things. With work affecting other aspects of life, rethinking your work-life balance could improve your wellbeing.

A demanding job may mean you’re able to afford a nice car or a large family home, but if you’re unable to take the car for a drive or spend as much time as you’d like with loved ones, is it worth it?  For some, rethinking their job will be appealing.

According to an Aegon report, just 4 in 10 people have thought about what gives their life joy and purpose. Spending some time thinking about this and making the answer central to your plans could help you get more out of life.

So, how does financial planning help here? It can help you understand the type of lifestyle you could still achieve if you did step back or how other assets can bridge an income gap. It can give you the confidence to create a work-life balance that suits you.

Striking the right balance as you near retirement

It’s not just getting about getting the right work-life balance now either. Financial planning can help provide more opportunities in your later years.

Since Pension Freedoms were introduced in 2015, which gave retirees more flexibility when accessing their pension, transitioning into retirement has become more common. Cutting back working hours or moving into a less demanding job has become a popular way to ease into retirement. It can help you create a work-life balance that suits your lifestyle goals.

Transitioning into retirement is appealing for many as it can still provide structure and meaning to your days, while still giving you more free time.

But is it something you can afford to do? Or are you hoping to retire earlier than the traditional retirement age?

Financial planning can help you take steps to give you the freedom to create the retirement lifestyle you want. It can give you the confidence you need to make retirement decisions that make sense for you.

If you’d like to discuss your finances and how they can help you live the life you want, 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.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.