Many of us are conscious of where we are wasting our money. Mystery direct debits. Expensive phone tariffs. Meals out. Everything adds up and, for some, an overdraft is a necessity as opposed to a financial buffer for one-off circumstances. Whilst poor money management can be fixed for good with tools such as budget apps and online banking, there are scenarios where your money isn’t working hard enough for you. This is what is known as dead money.
What is dead money?
A colloquial term, dead money refers to cash that is not earning interest. Whilst a piggy-bank full of cash or a general savings account may seem like a great way to save money, the funds are not creating any extra income.
Where could your money be dying?
Many people assume that if their savings and ISA accounts are growing, their current account isn’t over drawn, and their credit card has a £0 balance, that their finances are in fantastic order. Whilst this is by no means a bad way to live, making your money work for you is undoubtedly a more lucrative offer.
Currently, your money could currently be dying because:
- It’s sitting as physical cash in a safe
- It’s siting in a low or 0% interest savings account
- The stock or share you originally invested in has decreased in value
- It’s sitting in a general current account
How to keep dead money alive
If you want to keep your money in cash form, there are a number of ways in which you can make it earn you a return…
Stocks and Shares ISAs
Stocks and Shares ISAs are usually a fund used towards shares, property, or bond investments. Like pensions, ISAs allow you to save tax free. For the 2018/19 tax year, you could save or invest up to £20,000 into a one or more ISA accounts.
At Wellesley, we offer an ISA eligible Property Bond. Money you invest into our Wellesley Property Bond is used to acquire loans made by Wellesley which are secured against UK residential properties. The Property Bond can be held within an ISA, which allows you to earn tax efficient fixed returns of 5.50% pa.
Some key features of our Property Bond include:
- Property backed loans
- Loans are only ever lent to experience property developers
- 3 Year Bond
- Minimum invest of £1,000
- Listed on the Irish Stock Exchange
- Administration and custody services provided by The Share Centre
Regular current and savings accounts
Interest rates between current accounts and savings account vary between providers. Some banks draw customers in to opening current accounts with high interest rates that are fixed for a certain period of time before dropping to a much lower figure. Having a current account with one provider and a savings account with another is a great way to benefit from the best interest rates you can find, however, some people prefer to keep all their finances with one provider.
If this is the case, it may be worth having a look at the offers available from providers. Some offer a high interest savings account if you open a current account with them, or financial perks for opening a current account and credit account.
Despite many considering premium bonds as somewhat archaic there are still around 21 million people saving almost £72 billion in them. Although the prize rate did fall from 1.25% to 1.15% in May any winnings you receive are tax free and, the more you save, the better chance of winning you have.
You can apply for Premium Bonds online and can save between £100 and £500,000. All the money you save in a Premium Bond is backed by the treasury as money placed into Premium Bonds is lent to the government.
Whilst not all providers jumped at the chance to offer the LISA, it is an option for anybody under 40 who is unsure of where to stash their money. You can save up to £4,000 per year in a Lifetime ISA and the government will add a 25% bonus on top every year until you turn 50. So, if you save the full £4,000 one year, you’ll have £5,000 before interest. It can be used against a first property or cashed in when you turn 60.
Don’t let your money die
With a variety of options on offer it is time to put your money to work. There is, essentially, free money to be had by simply creating a new account or shifting your money between providers. Spending a small amount of time assessing your finances and making sure they are giving you a return will benefit you long term.