Sunday, August 7, 2022

How to save as the cost-of-living crisis pushes investment levels to a three-year low

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It’s becoming increasingly difficult for families to put money aside, but experts are urging people to keep in the saving habit – here are their tips

Figures from Scottish Friendly show that investment levels fell to their lowest level in three years in the second quarter of the year as the total value of new adult ISA investment policies fell 6 per cent.

New research shows stressed households are struggling to put money aside as the cost of living takes a hit.

This pushed them back to 2019 levels and from their recent peak in mid-2021.

However, the data showed a clear difference between women and men, with the value of female savers’ policies increasing by more than a fifth compared to pre-pandemic levels – but the values ​​of new male policies falling by 4 per cent over the same period.

Scottish Friendly savings specialist Kevin Brown said there was “very clear evidence” that many households are struggling to find enough disposable income to maintain regular savings and investment habits.

“As incomes tighten, it’s important that people have easy access to their spare money, but if families are still saving for the long term, then it’s crucial that they try to protect their wealth from the depreciating effects of inflation.” , he said.

So said Simon Phillips, independent financial adviser and partner at Continuum from Devon keep savingeven with reduced amounts, is much more advisable than stopping “because you’re less likely to start again.”

He added, “When you quit, it takes a different attitude to start again than when you start increasing your savings rate from a lower level.”

He said those who feel they need to reduce their savings should analyze where and how they are saving and consider cutting the types of savings least likely to yield a good medium- to long-term return.

“I meet people who save in cash ISAs because they have done so in the past, but pensions or stocks and shares ISAs are potentially better options,” he said.

“Cash doesn’t earn anything because of inflation, but many people tend to think that when the economy is struggling or the stock market is volatile, they should cut down on stocks and stocks and keep money safe in cash.

“From a financial perspective, that’s the worst thing you can do because you’re missing out on investing at a good time from a stock perspective.”

He added pension contributions Because of the tax breaks, they’re essentially growing by 20 percent before they’re even invested, making them a form of saving worth sticking with through thick and thin.

HyperJar CEO Mat Megens said habit is a “big part of saving.”

He added: “Keep in the habit if you can. If all you can do is £1 a month, set that as your goal so you keep the positive feedback loop of setting a goal, naming it, and achieving it.

Mr Megens said a good strategy is to have three types of savings – e.g rainy day emergencies, e.g treated and luxury, and for the longer termlike retirement.

“The best way to keep them going is to visualize what they’re there for,” he said.

Name the goalsseparate them from each other and put a financial goal for everyone – it’s so much easier to achieve goals that you feel in control of and can imagine if it gives you peace of mind or is good for the kids.”

He added that it might make more sense if the cost of living weighs on household finances use savings instead of borrowing money.

“If the rising cost of living means your expenses exceed your income, that’s a rainy day situation and you may need to top up your savings,” he said.

“They are almost never worth entertaining if it means incurring expensive debt. If you have debt like credit cards or loans, consider paying it off before sticking to a strict savings goal — it’s probably cheaper in the long run to pay it off first.”

Research by investment firm Charles Stanley, released this month, shows that 55 percent of people are not confident their finances will withstand the rising cost of living, while 53 percent are concerned they won’t be able to save for their emergency fund given the economic environment .

And while almost a third of people are forgoing everyday perks and luxuries to save money, a worrying 25 percent of people have or plan to cancel their company pension plans.

Such a step would be likely considered extremely inadvisable by financial professionals when avoidable, even if such person maintained monetary savings.

This is because the consumer price index recently hit a 40-year high of 9.4 percent and inflation is eroding the purchasing power of cash.

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