Man checks his savings


It’s generally good practice to think of your savings and investments within three distinct categories:

  • short-term – less than 5 years (emergencies, holidays and other short term goals less than 5 years away)
  • medium-term (school fees, university funding and other goals between 5 years and retirement)
  • long-term (retirement spending)

Why? Well, quite simply, anything in the short-term category should be kept safe in the best savings account you can find. For everything else you should be investing it.

To build your wealth in the past, most people headed to their bank or building society. They would look at the different types of savings accounts available and then choose the one they preferred. They could do this knowing that their pension was taken care of by their employer, usually a final salary scheme. This is a pension that pays you a guaranteed salary at a pre-determined age i.e. 60 or 65.

Bank savings accounts sound like a great idea. You put your money away and then access it when you need it. But bank accounts aren’t all they are cracked up to be when it comes to value for money. The amount of cash in the account is, in theory, meant to grow over time with compound interest. However interest rates are now at an all time low. In 1989 Bank of England base rate was as high as 14.8%. Today it is a mere 0.1% with talk of negative rates being a real possibility.

A savings account is fine if you have short term needs for your money and can’t risk stock market volatility. If you want your money to grow, however, then you will be disappointed.

Beware the ‘silent killer’

There is a ‘silent killer’ that slowly eradicates the value of the cash in your bank account and it’s called inflation. Inflation is effectively the rise in the price of goods and services in daily or common use.

If you’ve ever watch the news on TV or read a newspaper, they often talk about the ‘Consumer Prices Index’, or CPI for short. Each month the Bank of England collects around 180,000 separate prices of around 700 items. These cover everything from a pint of milk to the cost of a football ticket. It is this very large basket of goods which is our measure of inflation, or the cost of living to you and I.

Inflation tends to rise over time and can be vastly different depending on your age. For example, a 25 year old will more likely spend more of their money on goods which go down in price over time, such as televisions, computers and cars. An 85 year old however will more than likely spend a good chunk of their income on services which increase in price, such as heating and care costs.

Here are two examples of how prices of everyday goods and services have increased over time. You can find more at https://www.bankofengland.co.uk/knowledgebank/how-have-prices-changed-over-time:

How the price of goods has increased over time

Interest rates and savings

Another issue with using a bank to save your money is the rate of interest. Put in the simplest of terms, you earn interest on your savings, which is a payment from your bank for allowing them to use your money.

The original idea of banking is fairly simple: you give your money to the bank, they use it to loan to others and charge them fees and interest for using it. In return, you are paid interest.

The problem is, interest has been at incredibly low rate for a historically long time. That means you are not getting a lot, if anything, in interest. When you consider all of these factors, you’re effectively losing money due to the combination of low interest rates and inflation.

And that will only get worse if the Bank of England decides to cut interest to negative rates. It may help those who borrow, but it is very tough on those who are saving.

Savings versus investing

Interest rates in 1990 where around 10%, so putting money in the bank would have been a great idea. Your money would have been safe whilst the effects of compound interest would have gone to work ensuring your nest egg built up quite nicely. In fact, £10,000 saved over 28 years at these rates would give you a tidy £162,500 with next to no risk, an increase of 1,625%!

However, times have changed and using a current rate of 0.1% you would, over the same time period of 28 years, accumulate a rather disappointing £283 in interest. Now I know in reality you can get more if you shop around, but at the time of writing this I haven’t seen a no-strings savings account offering more than 0.9%. Such an account would still only generate interest of £2,864 after 28 years, an increase of just over 128%. If you remember from earlier, the cost of milk has gone up 176% over the same period.

In contrast, a FTSE All-Share tracker would have generated an average return of 4.54% turning your £10,000 investment into around £35,500. I’m not advocating that you go and put your money into a FTSE All-Share tracker by the way, as you should take advice from a professional adviser or at least have a more diversified approach to your investments, but you get the point.

Longer term gains

And be warned that in that time you will have seen years where you had less money than the year before. But this is for longer term money remember, so short-term dips is all part of how you make the longer term gains. This has worked for over 100 years and it’s not new; it’s just much more accessible.

Investing does have its ups and downs, but careful financial planning can mean medium and long-term investing makes complete sense for most people.

And keeping to a plan is essential, which is why we try to educate our clients so it’s easier to hold them accountable to their goals and keep them focused. Anyone can get cold feet when they see their hard-earned money going down in value (2001, 2008 and March 2020 anyone?), but it’s those who hold steady and keep their nerve that come out on top.

Of course, there is so much more to financial planning than the basic numbers. But I hope this has shown you that when it comes to money, saving and investing are very different. So, if you are putting money away in a bank account because you think it is ‘safe’, think again.

To talk to us about your savings and investments, contact us today.

Couple setting financial goals

A new year is a good time to assess your goals, whether that’s fitness, career or finances. When it comes to financial goals, consider the long-term as well as the next 12 months.

But if the start of a year is your catalyst to getting your financial house in order, our advice is get a plan in place today. Don’t leave it until tomorrow because tomorrow never comes, and you risk another year passing by without anything being done.

We know everyone has different goals and ambitions, so our tips are a useful starting point. Just remember that your financial plan is as individual as you!

Time to budget

Budgeting sounds like a very obvious place to start a financial plan. If you have no idea how much money is coming into and out of your bank account, you will find planning finances impossible.

Some people earn a good income but struggle with money because they have no budget in place. Managing your money properly gives you the ability to enjoy what you earn without over-spending and using credit excessively.

A monthly budget should include what money is coming in as well as what goes out. So write down what you are spending each month: food bills, mobile phone, utilities, mortgage, memberships, car costs etc.

There’s no point asking a financial planner to help you achieve your goals until you have an idea of your monthly budget. At a discovery meeting, a financial planner wants to know what you need to live each month, so now is the time to work it out!

Budget goals:
  • Set up a monthly budget and stick to it
  • Reduce unnecessary spending
  • Assess your budget regularly

Control your debt

When unexpected events happen, it is all too easy to grab your credit card. But debt has a nasty habit of increasing more quickly than you expect thanks to high interest rates.

Being debt free may sound like nothing more than a dream to you at the moment, but with proper financial planning it is possible. Start by setting up a repayment plan and make a commitment to stick to it; make sure you repay the most expensive debt first.

Reduce spending on treats to pay off your debt. Look at switching your credit card to one offering 0% on balance transfers. Some cards offer 0% on balance transfers for 2 years or more. This means you won’t be paying interest on top of what you owe.

Just make sure you pay more than the minimum and work out how long it will take you to repay the debt in full. In some cases, even taking a personal loan to consolidate debt can be a sensible idea, as your debt will be set to a structured repayment schedule. Just make sure you shop around for the best interest rates!

Debt goals:
  • Reduce discretionary spending where possible
  • Sell any unwanted items (such as old mobiles)
  • Have a plan in place to repay debt, starting with the most expensive debt first.

Save some money

There is one thing to learn from the past year, and that is unexpected events happen! Saving for a rainy day sounds like an old adage, but it is a very wise one.

No-one knows when they will need a few extra pounds to get them through a tricky time. Bank savings accounts are not the place to give you good, long-term returns, so don’t use them for a retirement nest egg. Having savings available for an emergency, however, is better than reaching for a credit card.

Sacrificing a few takeaways (or meals out when you eventually can) will really pay off when you need some extra cash.

Saving goals:
  • Reduce your grocery and takeaway bills
  • Find ways to save on utilities
  • Set a monthly savings goal
  • Start with short-term financial goals and work to long-term ones

Start investing

Investing allows your money to grow over time in a way that savings accounts cannot offer. Choosing to invest can be useful for long-term goals, as history shows that your money is likely to grow over time.

At Co-Navigate, we will look at your individual circumstances before suggesting if and what you should invest in. As well as the money you may wish to invest, we will consider your individual goals.

While you can invest on your own, it is always better to speak to a financial planner. They have not only studied the subject but have a wealth of experience.

Investment goals:
  • Speak to a financial planner
  • Set long-term goals

Setting goals is an important part of financial planning. Without them you are more likely to spend money you don’t have or waste it.

Our aim is to help clients relax about finances knowing they have a plan in place to ensure that they will achieve their goals. It also ensures that their family will be all right should the worst happen. Even during tough times, such as those we are facing now, knowing you have your finances in shape is one less thing to worry about.

Contact to us today to arrange a free online discovery meeting.

Boy checks finances and Child Trust Fund

If you have a child or children reaching the age of 18 between now and 2029 their Child Trust Funds (CTFs) are due to mature.

The CTFs are tax-free savings accounts given to 6 million children born between 1 September 2002 and 2 January 2011. Anyone reaching the age of 18 in the next 8 years or so could access up to £1,000 if parents made contributions.

You may have forgotten about your child’s CTFs, especially if you didn’t make any contributions. Our guide about Child Trust Funds will help your child access their funds, and we’ll offer hints and tips about what to do with the cash.

What are Child Trust Funds?

Set up by the Blair government, CTFs encouraged parents to save for their children’s futures. The aim was that the cash could help with future costs, such as further education funding.

Initially, the government gave £250 into the tax-free account during a child’s first year. A further £250 was paid in when children reached the age of 7. The payments were £500 for low-income families.

Parents, family and friends are still able to contribute to the account to top it up to a maximum of £9,000 per year. New CTF accounts were eventually scrapped in January 2011.

How they work

When they mature, CTFs become adult ISAs and retain their tax advantages. While children legally take responsibility from the age of 16, they cannot access the money until they are 18.

Parents or guardians were sent vouchers by HMRC for each child to set up a CTF account in the child’s name. Three accounts were opened:

  • Cash Child Trust Fund: This allowed parents to make deposits just like a bank account to earn tax-free interest.
  • Stakeholder Child Trust Fund: Savings are put into a mix of stock market investments with rules to reduce financial risk. They are charged based on the value of the fund and capped at a charge of 1.5% a year. If parents forgot to use the payment voucher within 12 months, HMRC opened one of these accounts.
  • Share-based Child Trust Fund: Most if not all the cash in this account is invested in shares without protection.

Each year, around 800,000 teenagers will gain control of their CTFs, and while the temptation might be to spend, research shows that teenagers would prefer to invest or save their money.

Finding lost Child Trust Funds

Around 2 million Child Trust Funds are estimated to have been lost by families, especially if HMRC set up the account. Don’t worry, because the funds are easy to find.

To find a fund, visit www.gov.uk/child-trust-funds and fill in the form, as this tells HMRC which account was originally opened. You will need a Government Gateway ID and password, which is fairly simple to set up. Once HMRC locates the details of the CTF provider, they will contact you with information by post within 3 weeks of your request.

What to do next

When your child reaches their 18th birthday, they have a number of choices:

  • Withdraw the money and spend it, perhaps using it to help fund a new car or a house deposit.
  • Convert it into an ISA (Individual Savings Account) to maintain the savings for a future purpose.
  • Use it to open a Lifetime ISA (limits apply) which can provide a 25% government bonus for use towards buying their first home.

Co-Navigate clients who have children or grandchildren can always ask us for help or guidance on the options available.

Couple with family considering inheritance and estate planning

Don’t leave it too late

Inheritance is an emotive subject and is likely to come into focus over the next 12-18 months as the Chancellor looks to raise money for the Treasury.

The coronavirus pandemic has cost the government billions. The Office for Budget Responsibility says it could be as much as £298 billion! Such reports are focusing some people’s attention to think strategically about how they will pass their wealth to the next generation, especially if tax relief is in the Chancellor’s sights.

There has been a rise in people gifting assets to family members, a report in the Financial Times claims. It says due to the pandemic, people are not hanging onto savings and investments in case tax relief is cut.

Make a plan

It is a shame that some people are only thinking about their inheritance and financial future in light of a major event. Our advice to clients is that they should enjoy passing on their wealth while they’re able to witness its impact.

Similarly, you don’t want to give away assets without ensuring you have enough to live your own desired lifestyle. A perfect financial plan would mean leaving £5 in your bank account on the day you die, having spent it yourself enjoying life, or seeing the good it can do for others.

That isn’t as heartless as it sounds! You see, without correct inheritance and estate planning, you may hand your loved ones a large tax bill that eats into the wealth you created. And who wants that?

Don’t wait

Waiting for the Chancellor to make a decision on his future may affect yours, so don’t wait. If inheritance tax changes, especially the ‘seven-year rule’ that allows sums to be given away tax free is reduced or removed, then you may regret waiting.

Your financial plan is as distinct as a fingerprint, and we treat your circumstances individually. It’s why we don’t have a catch-all line about advice on family trusts, investments or pensions. It depends on your own personal financial circumstances and what you want to happen.

Inheritance and estate planning advice

If you want more information about financial planning, contact us today on 0191 2286130 or email enquiries@co-navigate.co.uk. We can speak to you about your financial goals over the phone or via an online ‘face-to-face’ meeting if you prefer.

Woman happy thanks to having financial well-being

Life in the past few months has been a real struggle, with the Institute of Fiscal Studies claiming that the Covid-19 pandemic will affect people’s mental health.

Struggles in the wake of lockdown and isolation is likely to have a long-term effect, which will need addressing.

One area that has hit people hard is their financial well-being, due to worries about current and future employment and any debt they have. Thousands of job losses are announced daily across many sectors. And it is likely that more will follow in the future, sadly.

While the coronavirus pandemic was unexpected, those without a financial plan will be hardest hit, no matter what sector they work in. That doesn’t just mean those with lower salaries, as even seemingly affluent people admit worrying about money – especially if they have no plan in place.

At Co-Navigate, our role is to provide clients with a realistic financial plan to help them achieve their goals. After our first meeting, we use software that includes ‘what-if’ scenarios so we can plan for the worst. As a result, if or when, the worst happens, they have peace of mind. They know there is a plan in place, even if it is plan B or plan C.

Money and happiness

Money doesn’t buy happiness, the saying goes, but a number of studies show that’s not necessarily the case. Researchers from Purdue University revealed that there is an optimal point to how much money makes us happy.

Andrew T. Jebb, the lead author and doctoral student in the Department of Psychological Sciences, says, “It’s been debated at what point does money no longer change your level of well-being. We found that the ideal income point is $95,000 (£77,000) for life evaluation and $60,000 (£47,000) to $75,000 (£60,000) for emotional well-being.”

Having a healthy income not only gives us a chance to buy the things we need, it offers a chance to enjoy luxuries, such as new cars and holidays. It also means we can save and invest to increase our wealth, which provides security.

It is in times such as those we are living in that financial security trumps our desire to buy the latest technology! A newly released smartphone can wait as our understanding of money changes during recessions and downturns.

Increase financial well-being

Last year, leaders within the finance profession launched The Financial Wellbeing Conference. Set up to help financial planners, its aim was to show that someone’s well-being is just as important as wealth. During the conference, financial well-being was broken into five elements:

  • A clear path to achieve objectives
  • Control of daily finances
  • The ability to cope with financial shock
  • Financial options in life
  • Security for those we leave behind

What it means to us

The five elements mentioned are among those that form the bedrock at Co-Navigate. We love to hear about our clients’ goals, but nothing makes us happier than watching them achieve those objectives and take control of finances.

When it was discussed at the first conference 12 months ago, no-one would have guessed just how important the ability to cope with a financial shock would become.

So, how is your financial well-being? If you want to improve it and take control, then contact us today and talk to one of our team.

First-time buyer couple in their new home

If you are a first-time buyer, you may hear all kinds of ‘facts’ about buying your first home and obtaining a mortgage. But many of these facts are simply not true!

Getting your foot on to the property ladder is difficult enough without having to work out the financial and legal aspects for yourself. So, to help first-time buyers sort fact from fiction, we have chosen to discuss 5 of the biggest myths around mortgages and house buying.

First-time buyer myths

Myth 1: You need a big deposit

It is true to say that if you have a larger deposit you may have a wider choice of mortgages at potentially more favourable rates. It doesn’t mean you always need a big deposit, however. The coronavirus slowdown has led to some providers withdrawing mortgages that require a 5 or 10% deposit; these are known as 95% and 90% loan to value (LTV) mortgages.

Others, however, have retained their 90% LTV mortgages. This is where using an independent mortgage broker, such as Co-Navigate, is ideal because we access mortgages that individual house buyers and banks often can’t. If you have a lower deposit and can’t find a mortgage, speak to one of our experienced team members.

Myth 2: I must use the estate agent’s mortgage adviser

Estate agents and house builders often refer you to a mortgage adviser within their office. Some will tell you that it is compulsory to use their in-house adviser – that is simply not true!

You are free to use any mortgage adviser, bank or building society of your choosing. If you find your ideal house, tell the estate agent or house builder you are using your own adviser. 

The same goes for conveyancers or solicitors. You can use your own and do not have to instruct those used by the estate agent or house builder.

Myth 3: I can only get a mortgage through my bank

Banks and building societies provide mortgages – but they are not alone. Other financial institutions offer mortgages, although you often need an independent adviser to access the specialist providers.

Banks can only use their own mortgage products, whereas an independent adviser has access to many more. Even comparison websites cannot access all the products on the market. And independent brokers like us can often access better rates on mortgages than those tied to one provider.

Make sure you talk to an independent mortgage broker before you go house-hunting!

Myth 4: I do not need a mortgage until I find my dream home

If you wait until you find your dream home before considering your mortgage, it can end up as a nightmare. Unless you have checked what you can afford, your ideal house could be beyond your budget. 

Once you start considering buying your first home, it is advisable to speak to a mortgage broker or provider to find out how much you will be allowed to borrow and more importantly what is within your monthly budget.

Following the application process, if appropriate, we will ensure you receive an ‘agreement in principle’ (AIP). You often need to prove to the estate agent or house builder that you are in a position to buy and the AIP does just that. Please note that the AIP isn’t a mortgage offer. We can explain more about the AIP at a discovery meeting.

Myth 5: You only need a deposit and mortgage to buy a home

There’s more to buying a house than arranging a mortgage and having enough for a deposit. You need to remember that there are many costs included in buying a house.

Fees and expenses include, but are not limited to:

  • Survey costs
  • Mortgage arrangement and valuation costs
  • Solicitors fees
  • Removal costs
  • Buildings insurance
  • Stamp duty (your individual circumstances dictate what this may be)

If you are looking for your first home, remember that you must budget for these additional fees. This is something that we like to help you prepare at our first meeting, so you know what you can truly afford.

When you are ready to start searching your first home, contact us so we can help you find the best mortgage deal for you and be there to make the process as easy and as stress free as possible.