Financially, the coronavirus has affected each of us differently. For some it has been tough and very difficult. There are also those whose income has not been affected and who, due to the lockdown, have not being spending as much on leisure activities. These individuals have managed to accumulate funds, so I thought I would take this opportunity to run through some ideas on how to make the best use of this.
Firstly, these uncertain times are clearly not yet over. You should first make sure that you have funds which are readily accessible. So what would my recommendation be for funds on short term deposit?
Well, I am very keen on premium bonds. Interest rates that savers can enjoy are influenced by the Bank of England base rate (BBR). The base rate was reduced at the beginning of March to 0.1% which is the lowest level ever in the history of the bank, adversely affecting the interest rate on your savings. The reason why I think premium bonds are attractive is that they work on the principle that the interest the bond holder would have received is pooled and then distributed as prizes to lucky winners selected at random. You can ask for your stake to be returned at anytime. The amount we would recommend an individual has on deposit would vary but for many it would be between £5,000 to £10,000.
The next consideration would be to pay off any outstanding liabilities, starting with those with the highest rate of interest. Check whether there are any penalties and if so, whether there is a portion you can repay without incurring these. If there any funds left over then you should look at tax efficient investments such as ISAs and Pensions, utilising your allowances.
The other current consideration is fixing your mortgage if you currently have a variable rate. Although low interest rates are bad news for savers they are better news for borrowers. Many would argue that the only direction the Bank of England base rate could go is up and therefore it could be a very good time to obtain a fixed mortgage rate.
If you would like to discuss your savings or if you have any other areas of finance you need advice for we do offer a free without obligation consultation which is an opportunity to seek advice on any of your financial concerns. Contact us today to book an appointment.