15th June 2017 at 8:00am
Do you have a few questions about the world of finance and savings that you’re a little embarrassed to ask?
We all have blind spots, but when it comes to money matters it really pays to be in the know.
You’re not alone as, according to research carried out by the Organisation for Economic Cooperation and Development (OECD), the UK’s financial literacy isn’t quite up to scratch.
David Haigh, Director of Financial Capability for the Money Advice Service found the results quite shocking; ‘The report highlights worryingly low levels of financial knowledge in the UK, placing us 15th in the list of 29 countries surveyed – significantly below France and Portugal and just above Thailand.’
It’s not just the OECD that has found us Brits are bewildered when it comes to some money matters. A study by the mobile phone company Giff Gaff reveals we are confused about an array of affairs.
So what money matters stopped the public in their tracks? Well, here’s a few that cropped up, and we’ve answered those questions for you so that you needn’t pluck up the courage to ask.
What are interest rates and how do they work?
Knowing the basics of interest rates can really come in handy with your day-to-day borrowing and spending. From credit cards and loans to mortgages, interest rates determine how much you need to pay back in total when you borrow cash and how much you could get in return for saving.
If you’re borrowing:
Here’s a quick example from the Money Advice Service, when you borrow £1,000 from your bank;
‘If your loan attracts an annual interest rate of 10%, you will have to pay back £1,000 plus 10% interest (£100). So £1,100 is the amount you will have to pay back after one year.’
If you’re saving:
Interest rates come in to play for savers too, as the Money Advice Service explains;
‘It is effectively the rate your bank or building society will pay you for borrowing your money. The money you earn on your savings is called interest.’
For example if you save £1,000 into a bank account and get 1% interest your account will have £1,010 after one year.
How do I file a tax return?
Filing your tax return can be daunting, especially if you’ve recently become self-employed or you’re used to your accountant taking on the task.
But as The Mirror explains in an article with Chas Roy-Chowdhury, tax expert from the Association of Chartered Certified Accountants (ACCA), it’s all down to preparation;
“Before starting to fill out your tax return, you should make sure you have all the necessary information to hand. This includes details about your income…You will also need interest statements from banks and building societies, and details of pension contributions made – plus information about Gift Aid donations.”
For a comprehensive guide on how to fill out your self-assessment take a look at TaxAid.
How do I get a mortgage?
This is one area I have been trying to get to grips with over the past year or so, as I try tirelessly to come up with enough funds to get on the property ladder.
The first thing to think about is how big a mortgage you can afford, using a mortgage affordability calculator can help here.
The next thing you need to consider is how big a deposit you will need, this all depends on how much you are eligible borrow and also where you’re looking to buy.
For an idea of how much you’re likely to need, take a look at Which where they answer the question on every first-time buyer’s mind: just exactly how much will I need?
We’ve compiled some pointers when it comes to getting your first property and making moving that little bit easier in our blogs Tips to get on the property ladder and Top tips to make moving hassle free.
What is an ISA?
An ISA is an Individual Saving Account where you can save up to £20,000 in each tax year which runs from 5 April.
Saving in to an ISA is a great way to build funds for the future you want and deserve as when you withdraw any monies, you won’t pay tax.
There are a few different types of ISA on the market, including JISAs for children and the new Lifetime ISA which you can open as long as you’re under 40, all with differing allowances and benefits.
What’s more, you don’t need to have one type of ISA, you can mix and match within your £20,000 allowance. To find out more take a look at our What is an ISA guide.
The world of personal finance can be a tricky one to get up to speed with, as there’s so much to know and often not enough time to learn it all. But hopefully we have helped you get on your way to making sense of the seemingly complex.
The information in this blog or any response to comments should not be regarded as financial advice and is based on our understanding in June 2017. The links provided in this blog are for general information purposes only. Standard Life accepts no responsibility for information contained in the sites or for the sites not being available at all times.