This is a money matters guest post
Family life can sometimes be challenging, particularly when financial concerns start to appear on the horizon. None of us like to worry about money issues and there are often positive steps that we can take in order to make things a little easier. It makes a lot of sense to ensure that you make your money go as far as it possibly can. Although this doesn’t mean that you won’t be able to enjoy a few luxuries, it certainly suggests that there’s nothing wrong with reviewing the state of your finances. In truth, most families will have room for improvement in this area.
In general terms, when you’re thinking about your situation, it’s useful to consider your sources of income and the causes of expenditure. If you have debts, for example, then it’s really critical that you should understand how much you owe and the interest rates that are involved. It’s fair to say that many individuals have fallen into the trap of running up substantial credit card bills. Although this is something that’s incredibly easy to do, the interest rates associated with paying off credit cards can be exorbitant. Those rates will be far higher than you could ever earn from your savings. What this suggests is that it usually makes sense to work hard to pay off your most expensive debts. That should probably be your first priority, since it’s a course of action that will put your family into a far stronger financial situation.
Once you have cleared expensive debts, it’s time to start thinking about saving money. This may seem like something that’s pretty simple, but there are certain ways of ensuring that you really do make the most of your savings. To begin with, you may be tempted to think that the best approach would involve comparing savings accounts that are offered by various banks and building societies.
Although it’s certainly true that you should look to compare interest rates before opening any accounts of this nature, there may be something else for you to consider first. You may not realise that, when you earn interest on your savings, you will usually be taxed on the additional income that you derive. Depending on the rate at which you currently pay income tax, this means that you could end up paying a tax rate of up to 45% on your interest from savings. That’s not a very pleasant thought and it’s something that many people look to avoid. Fortunately, ISAs do provide a tax-efficient way for you to save money. Essentially, these are financial tools that are approved by the government. It’s agreed that you are allowed to save a certain amount of money each year within ISAs, which are free of taxation. All adults are given a personal allowance, which reflects how much money they can save within an ISA each year.
In the case of a family with two adults, each of those individuals will have an allowance. At the present time, the ISA allowance for this tax year is £11,280 per person. Of that sum, a total of £5,640 can be saved in the form of a Cash ISA. You can think of that as being like a savings account, except that you won’t pay any tax on the interest that you earn.
If you’re happy to take a few additional risks with your money, then you can also use ISAs to offer tax-free returns on some of your stock market investments. The reality for most families, however, is that Cash ISAs will represent the main tool that will be of use. If you don’t use your full ISA allowance within a particular tax year, then the remainder of that allowance is simply lost.
It’s a real shame that many families aren’t taking full advantage of this legal and tax-efficient way of saving money. You could ignore ISAs and simply rely on savings accounts, bonds and other financial tools. By doing so, you will end up paying more tax. That means that you’ll have less money left for the purchases that you need to make for your family.
Take a sensible approach to your family finances and ensure that you don’t have to spend time worrying about money. Visit http://www.thebabywebsite.com/article for more guidance on issues relating to families and finances.