How to Make the Most of Your Lockdown Savings
It’s no secret that for many Brits the period of national lockdown was quite a financial hit – however there are quite a few amongst us, there was little change in income and a sharp decrease in spending habits. These lucky people will want to make the most of the savings in order to safeguard against potential future financial issues. So we’ve broken down three ways you can do this.
Lockdown has been a fairly big financial burden to many, with a considerable number of Brits losing out on money. However, for some, their jobs have gone on undisturbed in a work-from-home basis, with one strong added bonus: their spending has gone way down.
With the daily commute largely ceasing to be a reality, and all non-essential shops having been shut for a long period of time, lots of these lucky people have found that they have actually been saving money, as their spending habits have been interrupted.
So, what should one do with this extra money? We’ve put together three options you should consider for an account to put your pennies to work.
Invest in a Stocks and Shares ISA
A Stocks and Shares ISA, also known as an Investment ISA, allows you to invest your money without paying tax on the returns. You can invest up to £20,000 each tax year into any ISA account. Generally, stocks and shares ISAs tend to generate higher returns than Cash ISA accounts, so if you’re looking to grow your money this is probably the best choice.
The stock market is always a good investment if you invest wisely. And there are so many investment ISAs to choose from, including:
- Index Tracker Stocks and Shares ISA
- Fund Supermarket ISA
- High Income ISA
- Ethical ISAs
- ETF ISAs
- Gold ISAs
- Monthly Income ISAs
- Share Dealing ISAs
- Self Select ISAs
- Structured Growth ISAs
Open a LISA
If you’re looking to save long-term, then a LISA is a must.
A LISA is a Lifetime Savings ISA, and is the highest-returns ISA you can have. The way that a LISA works is that the government will give you a 25% bonus for the money you put in, up to a cap of £4000 per year. This means you could stand to gain £1000 in returns each year.
The catch is that this is truly a long-term savings option: you can only withdraw money from a LISA in order to help pay for your first home, or once you are over 55. There are exceptions to this, of course, in certain situations such as a terminal illness.
With this ISA option, you can make substantial savings for later life, as well as for a first home should you not already own one. If you’re looking to put your extra pennies into a long-term account with the goal of financial security in mind, then this is the account for you.
It’s worth noting that if you take your money out before you are 55, or for a reason other than buying your first home, then you will lose the benefit of the 25% boost, as well as potentially accruing penalties depending on the provider.
Open an Instant Access Cash ISA
Now, Cash ISAs have pretty poor return rates – not least because of the dramatic drop in the Bank of England base rate during lockdown.
However, it is wise to put a little bit of cash into a Cash ISA, specifically an Instant Access Cash ISA, so that you know you have access to some money should a rainy day come.
In the instance that you have to pay an unexpected bill or have a to access some cash quick, it’s a good idea to have money in an account ready to go – even more so if that money is gaining interest in that account (even if the interest is pennies).
With many other accounts – such as Lifetime ISAs and Stocks and Shares ISAs – there are penalties for withdrawing your money before the agreed term ends.
By opening an Instant Access Cash ISA, you will avoid this problem and have – as the name would suggest – instant access to your cash, when you need it.