Archive for the ‘Savings Accounts’ Category

Here are my Top 3 Reasons Why You Should Save At Least Six Month’s Salary.

Reason Number 1:

If you are employed or self-employed,  your job is at the mercy of somebody else. Don’t delude yourself into thinking that management would never have to or want to release you and let you go. Your job is not cast-iron safe and neither are you. You are just a figure, a statistic, to your employer. Yes… I know… your boss is the nicest person on earth and he/she would never make you redundant. GET REAL… they don’t or won’t necessarily have a choice! Their job might be on the line too. Save 6 months salary (net or after tax) and you give yourself a massive boost of self confidence knowing that you’re ready for redundancy should it strike you.

Reason Number Two:

Living hand to mouth, feast to famine, is not good for you or your family. You earn a ton of money, have a great month, quarter or year and then you go spend it all! You need to iron out the peaks and troughs in your financial life. When you are doing well, put some away for a rainy day. When you’re not doing so well, you can take some out to help you survive your (hopefully) temporary crisis. Big companies do this in relation to the dividends they pay out to shareholders each year. It’s a trick called “smoothing”. So what’s stopping you from doing the same? Nothing.

Reason Number 3:

Sometimes in life opportunities come along that you just can’t miss out on. You might have a chance to buy an asset at a knock down price, but only if you have the deposit or the whole amount in cash. Buy that great car from a neighbour at a knock down price, possibly 50% cheaper than you’d get it anywhere else. Or buy an investment property that will, after 6-7 years, make you financially free, for only 15,000 down (and you earn 6% on that cash whilst the property is being built!). A no brainer in my book. But do you know the sad truth? Most people will never be able to take advantage of these gifts because they don’t have any cash in the bank.

I’ve just decided to withdraw the cash from my ISA account (earning a paltry 1% or less) and invest it in an overseas off-plan investment property. The developer will pay me 6% whilst it’s being built, then help me get a 70% loan to value mortgage, pay me a 10% rent guarantee for the first two years following build and then share with me (50/50) the net room rate earned. I am very glad I saved hard to have this money available.  I want the same for you too.

That’s why I have given you my Top 3 Reasons Why You Should Save At Least Six Month’s Salary.

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What Is The Best Savings Rate Available Today you ask. Good question… and the answer is 6%. There are some regular savings accounts offering more than this but the headline rate is NOT the rate you will receive. Normally the catch is that you’re only allowed to save a maximum amount each month, not stick the whole sum of money into the account on day 1. Which means that you won’t really be getting the full 6% annual interest on your money… you’ll be getting a blended and lower rate.

This is how it works. Let’s say today is the 6th April, start of a new tax year, and you want to invest some spare cash in a cash ISA. Now the regular saver ISAs tend to insist on a monthly payment rather than a lump sum, thus the term “regular saver” in the title of the account.

So what happens is you invest £300 on 6th April, then another £300 on 6th May and so on until 6th March the following year when you finish the savings plan. What this means is that on the first deposit of £300 on the 6th April you will get paid 6% on £300 for the full 12 month term. On the second deposit of £300 on the 6th May you will get eleven twelfths (11/12) of 6%, the next month you get ten twelfths (10/12) of 6% and so on until you reach the end of the year. Over the year the AVERAGE rate of interest you receive will be lower than the amount you would’ve received had you just socked the full £3,600 straight into the ISA cash account on day one!

Conclusion: just be careful and know that the headline rate isn’t always the true rate of interest you will be receiving.

If you do want to invest some money and receive a REAL rate of return of 6% then sign up to my list (enter your name and email address in the boxes in the top right corner of this page) and I’ll send you details of a very secure and profitable way of earning 6% on your money.