When we have worked for much of our adult lives and invested the fruits of those labours in caring for our children and ensuring their smooth transition into independent living we find ourselves able to invest some of our surplus income in providing savings for our future. Naturally, we want the best return on our investments. As this brief article will exhibit, the issue of cash savings accounts and which one to choose is far from straightforward, particularly during periods of economic downturn where the financial institutions are reluctant to offer anything other that parsimonious rates of interest. The first account that we will look at is the current account.
The Current Account
For reasons that will become clear, the current bank account is not one in which it is not always wise to invest your savings.
There are many current accounts that offer 0% interest on monies invested, regardless of the amount in the account. Obviously, being a current account you have unfettered access to your money and all the facilities that come with a current account, such as a chequebook and debit card but a combination of the low (or even non-existent) interest rates available and the fact that your bank is likely to have other savings options that are more beneficial and only marginally less flexible means that you should hesitate before leaving anything other than the bare minimum in a current account.
That means you should keep enough to service your monthly needs and ensure that any surplus is paid into a more efficacious savings account.
The next account we will look at is only slightly less flexible than a current account but it is almost certain to provide a greater return on your savings. This is the Easy Access Account.
The Easy Access Account
As its name implies, the easy access account offers a straightforward way of accessing your funds as and when you require them. However, there is likely to be a limit on the amount of money that can be withdrawn at any one time. Because the savings institution does not have the advantage of knowing that it will be holding the saver’s money for an extended period of time, as it does with some of the other accounts that we will examine later, the interest rates offered on easy access accounts are likely to be relatively low.
However, savers are likely to find that the easy access accounts that provide the most attractive interest rates are those that do not require an office or branch based organisation of the account. Accounts that can be run by telephone or, even more likely to attract generous interest rates, through the internet, cost the savings institutions less to administer and consequently they are willing to provide higher interest returns on savings.
Even with that advantage, however, it remains the case that Easy Access accounts are amongst the most unprofitable of savings products presently on the market. For accounts that provide a greater return the savings institutions want some guarantee about the amount and/or the length of the investment.
There are several types of accounts that savings institutions offer which provide higher interest returns on savings. These tend to be based upon the saver investing a fixed sum for a set period of time, on a fixed interest period subject to conditions or upon the saver investing a minimum regular amount into the account. The first of these that we will consider comes within the latter category and is most frequently described as a Regular Saver Account.
The Regular Saver Account
In simple terms, the Regular saver account is one into which the saver agrees to invest cash into the account on a periodic basis (conventionally this is monthly). Because the savings institution can rely upon receipt of cash on such a regular
However, savers are likely to find that the easy access accounts that provide the most attractive interest rates are those that do not require an office or branch based organisation of the account. Accounts that can be run by telephone or, even more likely to Regular Saver Account rewards investors who are prepared to pay an amount of money on a periodic basis (usually one month) into their savings account. Because the savings institution is able to operate on the basis that a fixed sum will be received it can provide what are, on occasion, some extremely attractive interest rates. However, there are certain conditions that apply to these accounts. Firstly, because the interest rates offered can be so attractive, there will be an upper limit on the amount that can be invested. If that upper limit is breached, it is likely that there will be interest penalties imposed, resulting in a much reduced interest return.
Equally, it is likely that there will be a limit on the number of withdrawals that the saver is permitted to make in a year. Once again, transgression against that condition is likely to result in penalties against the saver’s interest return. Nevertheless, for savers making only relatively small investments, who are able to see their cash tied up for a period, the Easy Saver can be a profitable option. The next type of savings account that we will consider is one where the rate of interest is higher than the standard current account or easy access account but where there are additional conditions affecting your access to your money. This is the Notice Account.
The Notice Account
In basic terms, the notice savings account is one where the saving institution offers a higher rate of interest in return for a condition on the account that requires the saver to give a minimum period of notice before making any withdrawal from the account.
The notice account is not appropriate if there is a possibility that you will require all or part of the funds urgently, or at least within the notice period applicable to the account. However, if you are able to have your cash tied up for the minimum notice period you can benefit from some enhanced interest rates.
It should be said that savers can still obtain access to their funds within the notice period if they urgently require them. However, in such circumstances the saving institution is likely to levy some quite Draconian charges.
There is a further variation on the type of account where the saver may have to commit to keeping his cash in the account. Other such accounts do not place such stringent requirements. The type of account that we will now consider is the Fixed Rate Savings Account.
The Fixed Rate Account
With a fixed rate savings account, the savings institution offers the saver a rate on his savings that will be fixed for a given period. This type of account is particularly useful when interests rates are likely to fall. Conversely, if interests rates rise, the account may well result in less of a profit that a variable rate savings account, such as a notice account, particularly if there are prohibitions against withdrawal for the account. Some advantageous interests rates can be found with these accounts, particularly those requiring that the funds remain in the account. Larger investments usually receive higher interest rates and the maximum investment can be relatively large. Interest can be taken monthly and this is not counted as a withdrawal from the account.
The interest is normally paid through a bank transfer to the savers current account either with the same savings institution or by direct debit to an outside account.
If you are able to invest a large sum into a savings account and are confident that interest rates are not likely to rise a fixed rate savings account would be appropriate for you, especially if it had no penalties against withdrawal in the event that interest rates were to take you by surprise.
We will now look at another means of saving, which can be either at a variable interest rate or a fixed term but which provides the extremely useful benefit of producing a tax free return. This is the ISA, or Individual Savings Account.
The Cash ISA
An individual savings account, The Cash ISA allows savers to pay a certain amount in each tax year, the interest upon which will not attract any UK tax. Although the interest rats are not likely to be as high as notice accounts or fixed rate accounts or fixed rate bonds, which we will discuss below, the fact that the rates are both gross and net on income tax boosts them by 20% for the basic rate taxpayer and by 40% or 50% for the higher rate taxpayer.
Cash ISAs are therefore extremely beneficial to those with significant income and of some use to those on basic rate tax. For those with only a modest income, it is worth shopping around to ascertain whether a better return, even if this is taxable, could be obtained through a regular saver account, for example. It is likely that the saver will be able to invest more in a regular saver account in a year than into an ISA, the limit upon which is presently £5,100.
As mentioned above, ISAs can attract either fixed rate or variable rate interest.
It should also be stated that Equity ISAs are also available but these go beyond the scope of this article and will feature elsewhere at some stage.
There is one product in the cash savings marketplace that is likely to offer the highest return on your investment. It can mean that your money is tied up for lengthy periods. It may even mean that you have no access to your interest other than on an annual basis but it remains a useful savings account for many savers. It is the fixed rate bond.
Fixed Rate Bonds
A fixed rate bond has many similarities with a fixed rate savings account but there are certain significant differences. Firstly, the term of a fixed rate bond can be significantly longer than for a fixed rate savings account. Many savings institutions offer bonds ranging from around twelve months right up to five years. The returns that are offered on the lengthier bonds are higher than for the shorter term bonds. The interest rates offered are frequently tiered, according to the amount of the investment and there is often a complete prohibition on either adding to or subtracting from the bond during the term. If there is not a total prohibition on withdrawing capital there is likely to be a very severe penalty in terms of days of interest loss.
Certain bonds provide for the payment of interest on an annual basis whereas some pay interest only at then end of the term. There are some that provide interest on a monthly basis but this normally involves a modest reduction in the interest rate on offer.
Savers should be wary of entering into lengthy bonds if they may need to withdraw their funds or if interest rates look set to rise during the lifetime of the bond. Otherwise, they represent a certain income on savings for the future that is not dependent upon the vagaries of interest rate fluctuations.
The credit crunch an the ensuing recession has meant that savers have been squeezed to the extent that certain accounts now produce little if any return on cash savings. At the same time, inflation is running higher than their investments can keep abreast with, resulting in an overall deficit. However, it still pays to shop around, which includes leaving your existing savings institution to find the best deal available to you. Check the comparison sites for the best savings rates that you can obtain. Bear in mind particularly that if a new savings institution is offering you a better return than your existing one you owe no debt of loyalty.
Take the best deal that you can find according to your own particular circumstances and always consider obtaining independent professional advice before making any investment, particularly a substantial one.
And always remember that the maximum protection that you are likely to receive for your savings is £50,000 per savings institution that you are investing with. Although higher rates are offered for substantial investment, it may give you peace of mind to play safe and keep your savings with each individual institution within that limit.
Shopping being an essential one for everyone can be fun and easy for some, while some would consider it a chore and irritating. Online shopping is the perfect solution for the home bound and for those who find shopping a difficult task. Online shopping has proved to be a boon for those who live in rural areas too. Whether you’re buying directly from a business online retailer, an individual online shopping site, or an Internet auction site, shopping online can be fun, simple, time saving and economical.
More about Shopping Online…
Since the development of the Internet, all hard-to-obtain, hard-to-do things have become quite simple that anyone can get anything from wherever they are, all by using a your PC. The Internet not only gives you an ocean of information you required, at the same time expands your shopping options like never before! Now, with only a few clicks of a mouse, you can go online to buy just about anything you need or want.
Festival shopping can be a real stress for most of you, and with Christmas just around the corner, it’s time for you to think about the gifts you have planned to buy. Secure online shopping gives you a little less shopping stress and saves more time, especially during Christmas and other festival season when the crowd packs the streets. Shop your things without venturing into the crowded shopping areas and wrestling your way between shoppers. Most important of all, you need not hurry or worry about finding a parking lot for your car. A simple online search can lead you to the right product at the right price, fast.
If you are looking for great online shopping suggestions or you want to find Australia’s best online shopping websites please read on…
Online shopping benefits…
- Online shopping offers unbelievable convenience to the shoppers.
- Online shopping allows people to browse through a variety of retailers, items and categories without leaving their home, compare prices with greater ease and order as many items as they can afford.
- It provides round the clock service that allows you to shop at your leisure, regardless of your time. Unlike direct shopping where you can shop only during the showroom’s working time, online shopping allows you to buy things any time, 24 hours a day, seven days a week and 365 days a year.
- Compared to physically going to a shopping mall to shop, online shopping can reduce overhead costs in a variety of ways that inturn reduces the prices to an unbelievable amount.
- Online retailers too offer many attractive sales promotions. “Festival/seasonal offers”, “Discount sales”, “Buy one and get one free”, and “Buy now” could be few of them. Bargains can be numerous online.
- Online shopping renders you great help if you wish to gift your daughter who is staying in another country, you can make her day special by sending her a jewelry set by shopping online.
- With a click of your mouse, you can buy anything from flowers to flight tickets. Groceries, clothing, jewellery, gifts, wine, art, pet supplies, pharmaceuticals, sports goods and equipment, toddlers and kids essentials are some of the others you can get online.
- The transaction you do is purely safe and your credit card data is encrypted.
Use the checklist below to help make your online shopping experience a safe one
- Be clear with your needs & budget: With copious online retailers on the Internet, supplying anything you wanted are sure to confuse you while deciding on the one you are looking for. So it is important to be clear with your needs and preferences along with your budget to make your shopping easy.
- Decide with your paying format: Be clear with your payment format, whether using your credit, debit or charge card before shopping, for making your shopping safe. It is always advisable to save and get your transaction records printed.
- Check out the terms & conditions: Do read the terms and conditions of the site from which you have decide to shop, to be clear with the delivery, refund policies and warranty. It is a good idea to search and shop from retailers within your country, if you want fast deliveries and low shipping fees.
- Know your online retailer: Make sure you shop from secure and safe online shopping sites.
We hope this info helps you to shop safely and wisely online. Online shopping is the most practical, economical and fun method of shopping that is perfect for everyone. It saves on your time. Browse through different products without going to the market, compare the prices of products offered by online stores and make the best deal for yourself and your loved ones.
There are money saving tips that can help you save now, and some that will help over a period of a few months. Although some may not seem like they will save you too much by itself, added together over the course of a year, you could save hundreds.
Coupons are a great place to start when looking for money saving tips. Although they can be a hassle sometimes, they allow you to save money on the things that you would normally be buying anyway. I’ve walked away from the checkout looking at my receipt and seeing that I saved $12 just by using coupons. Done every week, that’s almost $50 a month.
Replacing your faucets and shower-heads with low-flow water-saving ones can help to not only save water, by using less; but also help save the energy it takes to heat that water for your hot bath or shower. For larger families where there are more people who need to bathe or shower, these money saving tips can save a lot of water and energy.
Eating out is something that we all love to do, but it’s no secret that it can be costly. Taking a lunch to work, instead of buying one can help to save money, and even put towards that evening when you do go out to eat. For those with children, choosing to eat at places where kids eat free is also good. There are many restaurants that offer for kids to eat free on certain nights. Places with a buffet are also a great way to save. They may cost a little bit more, but it is well worth it for everyone to get full instead of getting home and hearing the words ‘I’m still hungry’, whether it is a child, spouse, or even yourself saying it.
We all know how much people love hand me downs, and while they are a good way to save money by using something again, sometimes it’s nice to get something new. Now as for money saving tips, this is my favorite, buy out of season. Although it is a bit unusual, I love to buy winter clothes in summer, summer clothes in winter, and Christmas decorations after Christmas. When you buy out of season, the stores are desperately trying to get rid of items to make room for the new ones and the markdowns can be a tremendous savings. I’ve done this to get many things, I would normally not be able to afford, and paid only a fraction of the price it was.
Although some money savings tips won’t save you a huge amount of money right away, every little bit helps, and it all adds up.
We favor investments that are low cost, tax efficient, diversified, liquid, and simple. Many investors often run into trouble when they invest in things that do not have these five characteristics. Investments with these five characteristics have been profitable over time, but typically are not very exciting. There is generally not a “hot story that you need to act on now!” associated with them. The financial services industry generally does not favor these type of investments because they generate very little profit from them. We are in the business of helping to maximize the wealth of our clients, not the financial services industry. Keep in mind that this list of investment characteristics is not comprehensive. Other factors to look for in investments might include attractive valuation, low correlation to your other holdings, a nice dividend yield or interest income, a tilt towards areas of the market that have produced higher returns such as value stocks, an appropriate risk level for you, etc.
Low Cost. We typically invest in low cost index based funds and exchange traded funds (ETF’s). The funds we invest in have an average expense ratio of only.30% per year. The typical actively traded equity mutual fund has an average expense ratio of 1% or more. With investment funds, the best predictor of future relative performance is the expense ratio on the fund; the lower the better. Hedge funds typically have annual expense ratios of 2% plus 20% of any profits earned. Some variable annuities and permanent life insurance “investments” can have annual expenses of 2% or more. By keeping a close eye on the costs of our investments, we can save our clients significant amounts of money each year and help them achieve higher returns over time (all else being equal). With investment products, you don’t get better performance with a higher cost product, in fact you typically get worse performance.
Tax Efficient. Our investments (index based funds and ETF’s) are extremely tax efficient and they allow the investor to have some control over the timing of the taxes. These types of funds have low turnover (trading activity), which is a common characteristic of tax efficient investments. We recommend avoiding mutual funds with high turnover due to their tax inefficiency. After the recent big increase in the U.S. stock market, many active equity mutual funds have “imbedded” capital gains of as much as 30%-45%. If you buy those mutual funds now you may end up paying capital gains taxes on those imbedded gains even if you didn’t own the fund during the increase. ETF’s typically do not generate long and short-term capital gain distributions at yearend, and they do not have imbedded capital gains like active mutual funds. Hedge funds are typically tax inefficient due to their very high turnover. In addition to investing in tax-efficient products we also do many other things to help keep our client taxes minimized such as tax loss harvesting, keeping our turnover/trading low, putting the right type of investments in the right type of accounts (tax location), using losses to offset capital gains, using holdings with large capital gains for gifting, investing in tax-free municipal bonds, etc.
Diversified. We like to invest in diversified funds because they reduce your stock specific risk, and the overall risk of your portfolio. Bad news released about one stock may cause it to drop 50%, which is horrible news if that stock is 20% of your whole portfolio, but will be barely noticed in a fund of 1,000 stock positions. We tend to favor funds that typically have at least a hundred holdings and often several hundred holdings or more. These diversified funds give you broad representation of the whole asset class you are trying to get exposure to, while eliminating the stock specific risk. We are not likely to invest in the newest Solar Energy Company Equity Fund with 10 stock positions, for example. We don’t believe in taking any risks (such as stock specific risk) that you will not get paid for in higher expected return.
Liquid. We like investments that you can sell in one minute or one day if you decide to do so, and those which you can sell at or very close to the prevailing market price. With liquid investments you always (daily) know the exact price and value of your investments. All of the investment funds we recommend meet this standard. We don’t like investments which you are locked into for years without the ability to get your money back at all or without paying large exit fees. Examples of illiquid investments would be hedge funds, private equity funds, annuities, private company stock, tiny publicly traded stocks, startup company stock or debt, illiquid obscure bonds, structured products, some life insurance “investments,” private real estate partnerships, etc. We prefer investment funds that have been around for some time, are large in size, and have high average daily trading volumes.
Simple. We prefer investments that are simple, transparent, and easy to understand. If you don’t understand it, don’t invest in it. All of our investments are simple and transparent; we know exactly what we own. Complicated investment products are designed in favor of the seller, not the buyer, and usually have high hidden fees. Examples of complicated and non-transparent investments that we generally avoid are hedge funds, private equity funds, structured products, some life insurance “investment” products, variable annuities, private company stock, startup company stock or loans, etc. “Make everything as simple as possible, but not simpler.” -Albert Einstein.
We believe most investors should have the majority of their portfolio invested in things that have these five excellent characteristics. By doing so you will avoid plenty of mistakes, negative surprises, and risks along the way. In addition, we believe your after-tax investment returns will likely be higher over long periods of time. Of course, not every smart or good investment will have all of these characteristics. For example, income-producing real estate property is illiquid (and often not diversified) but can be an excellent long-term investment if purchased and managed properly. Owning your own business is illiquid and not diversified but can be an excellent way to build wealth as well. We believe these five investment characteristics become even more important as you enter retirement, since at that point you may be more focused on reducing risk and preserving your wealth than building it, and you may need the liquidity to spend and gift part of your wealth during retirement. These five excellent investment characteristics can be a good screening device for possible investments and good factors to think about when investing.