Latest news with #savings
Daily Mail
an hour ago
- Business
- Daily Mail
RACHEL RICKARD STRAUS: I fear Labour is set to slap tough new rules on where you invest your Isa
It is all but certain that Chancellor Rachel Reeves will slash the amount that we can put in cash Isas. She has repeatedly refused to deny that she will – and industry sources suggest the most likely limit will be £4,000 of our total £20,000 tax-free allowance – the rest to be used only for investing. But details hiding in official savings figures that have until now been overlooked make me fear that far more Isa restrictions are on the cards. Here's why. Reeves has stated two motivations for meddling with Isas. The first is helping people to get a better return on their savings. Her theory is that if she restricts the amount we can save tax-free in cash we will invest instead (whether this strategy will work is debatable: it is more likely that we will just divert our cash into ordinary savings accounts). The second motivation is the one underlying all of Reeves's decisions: to help drive economic growth. This ambition will not be fulfilled simply by restricting cash Isa limits. Even if it leads to a wave of cash flooding into financial markets, only a small pool of it will go into UK companies. New investors are likely to put money into popular stocks – such as Nvidia, Meta and Apple – rather than favouring the UK. The UK makes up only 4 per cent of the global stock market, so an investor opting for a well-diversified portfolio would be unlikely to put much into this country. That's why, if Reeves wants to achieve her aims, she will have to force us to invest in assets that would boost UK growth. She may insist that a portion of stocks and shares Isas must be directed at UK companies. She made a similar demand of pension funds last week – and sources tell me this is being discussed for Isas as well. It wouldn't be the first time such an idea was mooted – the previous government considered something similar when it tried to launch a British Isa that savers could use to invest in UK companies. The next clue that Reeves will force – or incentivise – savers to invest part of their Isa allowance in the UK is in the Premium Bond figures. Premium Bonds hold so much of our cash that if encouraging us to invest more was her sole priority, she'd be slashing the amount we can put in them too. From a saver's point of view, Premium Bonds offer an even poorer return than cash Isas. At least in an Isa you earn interest. With Premium Bonds you're simply holding out for a prize. There are millions more holders of Premium Bonds than cash Isas – around 24 million versus just 14 million – and we hold a stonking £127.7 billion of cash in them. As many as 1.2 million savers hold the maximum permitted amount of £50,000 in Premium Bonds. No doubt plenty of that cash could be earning a better return if invested instead. If her priority was to get better returns for savers, she would slash that maximum. But, of course, she won't. Not just because it would be unpopular – that has not stopped her in the past. But because, unlike cash Isas, money saved in Premium Bonds does help drive economic growth. Premium Bonds are one of the products sold by NS&I to bring in billions for the Government for it to spend. It is a form of government borrowing – but one that doesn't appear on the books like other types of debt. Her willingness to overlook poor returns for savers in Premium Bonds shows where her priorities lie: economic growth first, savers' wealth second. The third clue lies in the official Isa figures from HMRC. They reveal that restricting the amount we can save in cash to encourage us to invest more will not work. Until 2015, Isa allowances were restricted just as Reeves is currently planning. You could only put a proportion of your Isa allowance in cash – the rest had to go in stocks and shares. If Reeves is right that savers need to have their cash Isa allowance curbed to get them to invest, you would expect that savers might have flocked to cash as soon as the rules were abolished in 2015. But they did not. In fact, when they were permitted to save as much of their allowance in cash as they liked, they chose to invest more. Before 2015, for every £10 going into a cash Isa, £4.10 went into a stocks and shares Isa. After 2015, for every £10 going into cash, £5.90 went into stocks and shares, analysis by investment platform XTB shows. The proportion going into stocks and shares has ballooned – we hold £431 billion in stocks and shares Isas, compared with £294 billion in cash Isas. So the Chancellor can't use the excuse that she needs to restrict cash Isas to get savers to buy more stocks and shares – they are already investing more. But that won't matter to her. The real motivation is to drive growth – and in this plan cash savers are merely a pawn. So what comes next? I fear the freedom to save and invest within our Isa however we choose is about to be clobbered on all fronts. Savers need to prepare for a regression back to 1999, before the Isa was even launched. Back then, savers were reliant on Personal Equity Plans. These were the predecessor of the Isa and offered tax-free investing but required you to put a proportion of your allowance into UK companies. That is where we're heading – back where we started, with our freedoms restricted, as if nothing had been learned.
CTV News
4 hours ago
- Business
- CTV News
Tips on how to build an emergency fund
We give you the top 5 things you can do now to set up an emergency fund. Setting aside money for unexpected expenses is an important way to protect your financial stability and to have peace of mind. An emergency fund is a cash reserve that is specifically set aside for when unplanned or unexpected financial emergencies arise. Whether it be a broken cell phone, car accident or loss of income, setting up an emergency fund will help keep you stay comfortably afloat without having to go into debt. 'It's not if you need it, it's when,' said Ottawa financial advisor Mitch McLean. A 2024 Angus Reid survey found that the majority of Canadians under 55 can not handle an unexpected expense of more than $1,000, making financial literacy all the more important. While there are different strategies for how to get started, CTV Morning Live spoke with McLean to provide tips on where to begin. Set up a separate account from your chequing account McLean says you should begin by opening a separate bank account for your emergency fund from your day-to-day chequing acount. 'Keep it separate. A chequing account is for daily activities, like paying bills,' Mclean said. Having your emergency fund in a separate account will help you not be tempted to spend it on non-essential costs. Automate it Setting up automatic payments on a biweekly or monthly basis is a helpful way to save consistently overtime. Most banking institutions allow customers to set up recurring transfers through bank accounts to move money from chequing or savings accounts. 'If you can automate it, you can set it and forget it,' Mclean said. He adds that creating any savings account is created by 'good habits,' requiring consistent discipline to see it build overtime. Yes, only use it for emergencies While sometimes tempting to dip into your savings from day-to-day expenses, it's important to maintain discipline to see that fund grow, Mclean said. 'Once you dip into it, make sure to replenish it,' he said. Set minimums and maximums Mclean recommends knowing the lowest amount you want to see in the fund and to also know when to stop contributing. 'You should probably have two months of household bills. That would be your minimum,' he said. But contributing too much to your account can also become an opportunity cost, he said. Many financial advisors recommend keeping between three to six months of living expenses, though this can vary depending on individual circumstances.
RNZ News
4 hours ago
- Business
- RNZ News
Money in transaction accounts costing New Zealanders billions
Experts are reminding New Zealanders to consider whether cash they have stored in the bank could be be earning them interest. Photo: 123RF New Zealanders may be leaving money on the table by keeping their cash in transaction accounts. David Cunningham, chief executive of mortgage broking firm Squirrel, said there was significantly more money in transaction accounts now than before Covid. Most banks do not pay interest on transaction accounts. Cunningham said transaction account balances had peaked at $53 billion when interest rates were close to zero, and people could see little reason to change. It had fallen to a recent low of $37b but had now lifted again to $39b. "Almost all of this earns 0 percent [interest]." If that money was shifted into an account paying 3 percent, it would give savers just under $1.2 billion in interest a year. Cunningham said before Covid hit, there was about $28 billion in transaction accounts. "You're always going to need some float in your transaction accounts but a lot of this is lazy money." He said it was customer inertia that also delivered higher profits to the banks, because they could make money from the cash sitting in the accounts. But he said banks should be encouraging customers to check that they had their money in the right accounts. "Every time you log in they could remind you that you've got say $20,000 in a transaction account earning nothing and if you moved it to savings you could earn x… that would be a way to make sure people were better off," Cunningham said. Claire Matthews, a banking expert from Massey University, said some people kept their money in transaction accounts because of the ease of access. "They may have concerns about fees to access it if it's in a savings account. Partly I think it's because they don't think the interest will be worth it - but they may not have actually looked at the numbers, because depending on the amount it may be very worthwhile over time. Partly, however, it is probably just not getting around to doing it." Banks have been cutting rates for term deposits and some savings this week, after the official cash rate reduction . Westpac said on Thursday it was cutting the rate offered on a number of term deposits by 10 basis points. ASB said it was cutting the rate offered on its Savings On Call, ASB Cash Fund, Savings Plus and Headstart accounts by 20 basis points. That took the Headstart rate to 2.7 percent. Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Yahoo
7 hours ago
- Business
- Yahoo
Net Worth for Gen X: Are You Poor, Middle Class, Upper Middle Class or Rich?
As a generational cohort, annual incomes among Gen X in the United States are all over the map, especially when compared to the older baby boomers or the younger generations of millennials and Gen Z. The gap between wealthy and poor Gen Xers (those born from 1965 to 1980) throughout American households shows quite the discrepancy in savings account levels, credit card debt and work-life balance. Be Aware: For You: What does set Gen X apart, aside from possibly being the last people to benefit from Social Security, is the gap between how much they want to save and how much they have saved. That gap lays out stark differences in their income levels — let's explore further below. With Gen X next up on the retirement chopping block, many non-retired Gen Xers and financial experts alike believe it will take between $1 and $1.5 million in savings to retire comfortably. This is unfortunate as the average savings for someone of this generation is only $150,000. Gen X, seemingly more so than baby boomers and millennials, has been forced to contend with skyrocketing costs of living, expensive education attainment and even upper-income households living paycheck to paycheck. For those living in a middle-class household with only about 10% of the recommended savings in the bank, this could mean severe delays in retirement planning or a huge downshift in lifestyle expectations. Find Out: It's not that all Gen Xers are struggling to meet their savings goals. The median net worth of Americans between the ages of 45 and 54 is $247,000, according to Federal Reserve data. Those between the ages of 55 and 64 have a median net worth of $364,000. One thing those figures tell you is that a lot of Gen Xers are worth much more than the median and a lot are worth much less. To get an idea of the typical earnings for a Gen Xer, a good place to start is the U.S. Bureau of Labor Statistics data. Here is what the BLS's latest report found: The median weekly earnings for all 119.2 million full-time wage and salary workers in the U.S. were $1,139 in 2024, or $59,228 a year. The median weekly earnings for men ages 45 to 54 were $1,442 a week or $79,984 a year. The median weekly earnings for women ages 45 to 54 were $1,156 a week or $60,112 a year. If you are a Gen Xer and your annual income ranges between about $60,000 and $80,000, you're probably somewhere in the middle-income category of American society. Defining 'upper-middle class' is a little trickier because there is no set measurement everyone agrees on. As USA Today reported, the upper-middle class is often defined as the top 15% to 20% of earners. However, some financial experts say those percentages should be lower. Whether you have lived in middle-income households or consider yourself part of the American upper-middle class, your social class may not get you as far as you think. Here are some income estimates from the Pew Research Center: Lower class: Incomes at or below $30,000 Lower-middle class: Incomes between $30,001 and $58,020 Middle class: Incomes between $58,021 and $94,000 Upper-middle class: Incomes between $94,001 and $153,000 Upper class: Incomes greater than $153,000 Top 1%: Incomes of at least $600,000 Those categories do a good job of giving you a general idea of where Gen X and others fall on the income scale, but they don't capture what it means to be 'poor' or 'rich.' Earning $30,000 a year makes you poor in some areas and lower-middle in others. Similarly, earning $153,000 a year does not really make you 'rich,' no matter where you live. The U.S. federal poverty level for 2025 can also be a good range of where your income will land you in the long term. Here are some estimates: 1-person household: $15,650 2-person household: $21,150 3-person household: $26,650 4-person household: $32,150 Each additional person after eight: Add $5,500 As for being rich, it depends on where you live. As GOBankingRates last reported, the income needed to be in the top 5% of earners ranges from a low of $308,523 a year in Mississippi to a high of $562,886 a year in New Jersey. Again, these figures apply to all generations, including Gen X. The bottom line is that, unlike for previous generations like boomers or even the silent generation, simple ingredients of the American dream such as affordable higher levels of education and real estate, along with retiring at a reasonable age, seem to now be allusive for Gen X. They are the first wave in the attack against the middle class. Each generation has its own relationship with money and it seems to present like the following: Boomers: It's all about the money. Gen X: Is it all about the money? Millennials: Where is the money? Gen Z: What is money? More From GOBankingRates 10 Genius Things Warren Buffett Says To Do With Your Money 8 Common Mistakes Retirees Make With Their Social Security Checks This article originally appeared on Net Worth for Gen X: Are You Poor, Middle Class, Upper Middle Class or Rich? Sign in to access your portfolio
Yahoo
8 hours ago
- Business
- Yahoo
Suze Orman's 5 Best Tips for Saving Money Even When Living Paycheck to Paycheck
With around half Americans reportedly living paycheck to paycheck, saving money might seem impossible. But financial guru Suze Orman has some surprisingly doable advice for squeezing savings out of even the tightest budget. Read Next: Learn More: Here are Orman's five best tips for how to save even when living paycheck to paycheck. 'You have to strike the word 'can't' out of your vocabulary,' Orman told CNBC. Instead of saying you can't save, start looking for places where money is slipping through the cracks. That $10 lunch out? It could be going into your retirement account instead. Try This: Think you're too broke to save? Orman said to look closer at your spending. According to she challenges everyone to cut utility bills by 10% (hello, lower electric bill!) and examine those credit card statements. There's usually some 'hidden money' in there you could redirect to savings. Here's a trick that actually works: Have money whisked away before you can spend it. 'You will find that you do not miss it,' Orman explained to CNBC. Even $50 a month adds up — especially if you put it in a Roth IRA, where you can access your contributions if you really need them. Every time you're about to buy something, Orman suggests asking one simple question: 'Is this a want or is this a need?' Medicine and groceries? Needs. That new phone case? Probably a want. Being ruthless about this distinction can free up surprising amounts of cash. While it might seem impossible, Orman insists everyone needs an emergency fund covering eight to 12 months of expenses. Start small — even $20 a week adds up. 'The most important thing is that you have got to live a life below your means, but within your needs,' Orman said. You don't need to make six figures to start saving — you just need to be strategic about it. Start with what you can, automate it and slowly increase your savings as you find more 'hidden money' in your budget. More From GOBankingRates Surprising Items People Are Stocking Up On Before Tariff Pains Hit: Is It Smart? 10 Unreliable SUVs To Stay Away From Buying This article originally appeared on Suze Orman's 5 Best Tips for Saving Money Even When Living Paycheck to Paycheck
