Ways for investing and saving money for your family

Ways for investing and saving money for your family - motherhooddiaries

Investing and saving money for the children can become parents’ biggest concern, alongside their health and the education that they receive. Generally, it is advised that you should have at least 3 months’ worth of salary tucked away into a savings account, to use as an emergency fund for worst-case scenarios. But, let’s face it, in this day and age, it is incredibly difficult to save any amount of disposable income, especially with the list of expenses parents are faced with, unless you’re one of the privileged folk and fall within the top 10% earners in the UK (bearing in mind that we are talking about a couple with two children, in which the median income of the top 10% is £151,400 a year). Many families do not earn a combined income of over £100,000 and, if they do, they are considered as well-off. So, what effective and safe ways are there to ensure that you can capitalise on your family’s income, even if you fall within the lowest decile of earners in the UK (earning around £17,900 a year for two adults and two children)?

The difference between saving and investing

Saving is putting money aside to make a lump sum. You save for a particular goal, like a deposit for a house, a car, a holiday, or your emergency fund. You would put your money into cash products like a bank or a building society.

Investing is taking some or all of your money and buying things with the aim of making that money increase in value, i.e. shares, stocks or property.

Government Premium Bonds (Investing)

Backed by the HM Treasury, Government Premium Bonds (GPBs) have been going since 1861 and are 100% secure, all of the time. So, you wouldn’t have to worry about losing your money because of a bad month, or betting on an asset and seeing a decrease. GPBs are, however, not to be confused with banks, they simply offer cash savings and investments.

Every month you are entered into a prize draw to be in with the chance of winning anything from £25 up to £1 million. The higher you invest, the higher your chances are of winning that £1 million jackpot. And the bonus is that all prizes are tax-free. So, if you win £1 million, you take home £1 million. The annual prize fund interest rate currently stands at 1.35%.

GPBs are suitable for savers who have £100 or more to invest, want 100% security for their money and want to make the most of their tax-free investment opportunities. The downside is that you won’t make guaranteed returns and you won’t receive interest on your investment. You are just betting on winning a monthly prize draw, which will increase your investment by the amount you win. Otherwise, the amount of your investment stays the same – no more, no less.

Spread betting (Investing)

Currently, spread betting is the largest, most common form of financial betting in the UK. Simply put, you bet on the likely direction of a financial market, i.e. you are predicting a financial outcome of an asset, which you don’t have to own.

“Spread betting is a way of investing in the movement of a particular market – like forex, shares or indices – without actually owning the asset.” www.ig.com

Spread betting sounds complex, but it’s a matter of doing your numbers. Take the Euro currency valued against the Dollar, for example. If the European stock markets are going down and the US stock markets are on the rise – you’d bet that the Euro is going to lose value to the Dollar. You can find many sites online that offer bonus balances to try out spread betting and you can actually win and collect if you do well. But, this is risky business. You will be risking your own savings, so be sure to check out the spread betting review sites to get the best deals out there – and remember to start small!

Life Insurance (Saving)

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“In the UK, one child in 29 loses a parent before they’ve finished full-time education.” (source: Aviva, Jan 2013 – taken from www.moneysavingexpert.com)

No one wants to think about losing a parent, but the above fact is very real and the sooner you do something about it, the better the outcome will be for your kids. Level term life assurance is one of the cheapest ways to protect your family’s income if you die. It pays a fixed amount to your dependents and you only get a payout if you die within a fixed term, for example, 18 years.

Consider making a Will if you have assets such as a house or savings, as you’d likely want to pass these on to your kids. The key here is to protect your children in case of an unlikely and unfavourable outcome. More information on Life Insurance and Wills can be found on Money Saving Expert.

Investment ISAs (Investing)

Each year the Government allows UK residents over the age of 18 to invest a certain amount of their money in an ISA (Individual Savings Account). In the tax year 2015/16, you could invest a maximum of £15,240 in an ISA, which is free from both income tax and capital gains tax. This mean you won’t pay tax on any increase in the value of your investment or on any of the withdrawals that you make. You also don’t need to declare your ISA on your tax return.

An Investment ISA will offer you the chance to build a stocks and shares portfolio and can potentially offer you higher rewards than a savings account. But, as with any other form of investment, using an Investment ISA can be risky and you could stand to lose some or all of the principal amount you invested. But, as long as you do your research on the different types of ISAs available and you speak to a professional about what is right for your individual needs then you can minimise risk and maximise the growth of your investment amount efficiently.

wallet-cash-credit-card-pocket - motherhooddiaries Lending (Investing)

Lending your money to a borrower may sound counterintuitive, but with the right backing, you could stand to earn interest from a low-cost loan. If you have saved a substantial amount of money and you are looking to help someone, then lending your money out may be a temporary solution. Look for peer-to-peer lending companies like Lending Works who include a Reserve Fund that covers any missed loan repayments and a unique insurance, which help to protect against defaulting borrowers. But, these companies tend not to be covered by the Financial Services Compensation Scheme, so look into this option thoroughly and read all the terms and conditions before parting with your cash.

Points to note before thinking about saving or investing

  • Make sure you have paid off all of your debts first. Consider a consolidated loan, which allows you to pay off one consolidated debt in monthly instalments. If you are struggling to get a loan, some lenders offer loans for bad credit, so it’s worth doing your research and checking out what’s available to you.
  • Make sure you are in a financial position to save – could your family cope financially if you died?
  • Put aside at least 10% of your earnings every month (or as much as you can afford) and keep saving
  • Set saving goals and work towards one at a time
  • Read up on all the pros and cons of a particular investment activity before parting with your hard earned cash.

If you have any more tips on how to save and invest for your family, please share with us in the comments below.

Ways for investing and saving money for your family - www.motherhooddiaries

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Leyla Preston (465 Posts)

Leyla Preston is the owner and Editor of Motherhood Diaries global magazine for parents. Leyla is a busy mother of two even busier boys; Aron, 5, and Aidan, 4. When Leyla isn’t feeding, managing a gazillion tasks or cleaning the infinite mess at home, she is busy working on this magazine and a new cooking channel coming very soon – no rest for the wicked!You can follow Leyla on Twitter (@M_Diaries) or join the busy Motherhood Diaries Facebook group where all mums get together and share stories and solutions with one another: https://www.facebook.com//groups/motherhooddiaries/

  • Some good points there, Leyla! Of course, winning the lottery would be a whole lot easier!

    • Lol, I totally agree. One can only dream 🙂 Hope you’re doing well xx

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