For many of us, Easter marks the change in season to spring. After you have devoured all those chocolate eggs, it’s a great time of year to not only put your house in order but your finances too. If you’re wondering how to look after your nest egg, we share some ideas.
Why have a nest egg at all? Building and protecting a pot of savings will help you achieve your goals in the present day and in your retirement. Having a strategy to create your nest egg will also ensure you have a financial buffer if you need one. This is especially important as we continue to feel the impact of the current high cost of living. So, what can you do to preserve your hard-earned money and make it work harder for you at the same time?
Start with a goal
Creating a savings strategy is much easier when you have a strong goal in mind. You might want to save towards buying a new car, property or a luxury holiday. You might want to help your child buy their first car or home, or to support them with their university studies.
When you have a goal, you have a purpose, which means it’s harder to then use your savings for another reason. Once you have decided on some clear reasons for saving, then you can think about the different ways to save. And remember, saving is always a long-term strategy so be patient! Good things come to those who wait.
Simple savings can go far
If you haven’t started saving – or you’ve had to use your savings and now need to start again – think about a simple strategy. As we move towards a cashless society, you might not have spare pennies for a change jar. But if you do have cash lying around, it’s worth collecting this altogether and paying into an account. Seemingly small amounts of cash can soon add up.
Another easy option is to pay a regular amount into a bank account, even if it’s £20 per month, which is £5 a week. Many people wouldn’t hesitate to buy a bottle of wine each week for £7 or more, and your £5 will soon turn into £240 per year. In 5 years, you will have saved £1,200. If you can save more, you can turn a small standing order into a large sum.
Say goodbye to any debts
Although for some this is easier said than done, clearing your debts is a great strategy for building a nest egg. It might not be possible to get rid of them all, especially your monthly mortgage repayments, but it’s a good start. Check your existing mortgage deal to see if you’re eligible for a more suitable product that will reduce the level of interest you’re paying.
Try to pay off credit cards each month to avoid escalating interest. Make use of zero-interest credit card offers, but always remember to pay off the debt as soon as possible. Also, check the interest rates on your savings accounts. Most high-street banks offer very low interest rates on their savings products, so it’s worth shopping around to find a suitable deal.
Some banks and providers offer higher interest for online only or fixed-rate savings accounts. There might be penalties for withdrawing money early, but this measure will stop you from using your savings for other purposes. Before you switch accounts, speak to our financial planning team who will be advise you on a suitable savings strategy.
Save and invest wisely
As the saying goes, “don’t put all your eggs in one basket”. A wise savings strategy spreads your wealth across different types of accounts, investments and assets. First, make use of any tax-free allowances that apply to you or your partner.
You can save up to £20,000 a year tax-free in an ISA and this allowance runs from April to April. You can hold a Cash ISA and a Stocks & Shares ISA, but the allowance would be for the total combined. Also make use of the pension allowance, which has recently increased to £60,000 a year. The lifetime allowance charge has also been removed, and the lifetime allowance itself will be abolished from 2024 to 2025.
If you want your money to work harder for you, then choose an investing strategy with a diverse range of asset classes. This will help you spread your level of risk across a wide range of funds, protecting against sudden changes in market volatility.
If you would like to improve your savings strategy, please book a financial planning review with one of our team. We will look at your goals, your current savings, pensions and any investments, as well as providing you with cash-flow modelling to cover ‘what if’ scenarios.
Do you need a financial plan to help you look after your nest egg? Get in touch with our financial planners to book your review.