As we’re sure you may know, the end of a year can be a great time to turn over a new leaf and make some positive changes to your lifestyle. Now that we’ve reached the end of a tax year, there’s no better time to make some changes to your financial habits too.
If you want to improve your financial wellbeing, it’s never too late to start. Read on for five financial resolutions for the new tax year.
1. Build a nest egg for a child or grandchild
If you want to give your children or grandchildren the best start in life, you may want to start putting aside some money for their financial future. Having a nest egg can be invaluable for giving them a leg-up when they turn 18.
If you aren’t sure of the best way to save for them, a good place to begin is with a Junior ISA (JISA). In the 2021/22 tax year, you can save up to £9,000 per year for a child or grandchild in a tax-efficient way.
Bear in mind, however, that only parents can open a JISA on behalf of the child, so you may have to speak to your children if you want to open one on behalf of a grandchild. Thankfully, once the JISA is open, anyone can freely contribute to it.
There are two main types of ISA that you may want to consider:
Junior Cash ISA
This saving vehicle is an easy way to put aside money for a child or grandchild and can result in a good nest egg by the time they turn 18. One of the main benefits of a Junior Cash ISA is that any interest that they will receive on your contributions is paid tax-free.
If you do opt for this type of savings account, it can be important to shop around for one with a good rate of interest, as if it is too low then the returns may not keep up with the rate of inflation.
Junior Stocks and Shares ISA
A Junior Stocks and Shares ISA lets you invest in stocks, shares, and bonds on your child or grandchild’s behalf. Like with Junior Cash ISAs, returns on your contributions are free from Income Tax or Capital Gains Tax.
While this type of ISA does expose your contributions to investment risk, it can also produce higher returns than a Cash ISA.
According to a report by the investment management company Nutmeg, if you invested the full £9,000 into a Junior Stocks and Shares ISA for a loved one each year, then with an average 5.5% return it would be worth £279,924 by the time they turned 18.
2. Put a Lasting Power of Attorney in place
A Lasting Power of Attorney (LPA) is a legal document that lets you appoint one or more people to look after your finances and personal welfare if you were ever unable to.
There are two types of LPA, which cover different areas, and you should consider whether you need one or both.
The first is a Health and Welfare LPA, which can cover issues such as your daily routine, any medical care you may need, and whether you may need to move to a care home. The second is a Property and Financial Affairs LPA, where a nominated person can manage your finances, pay bills, and collect benefits on your behalf.
While nobody likes to think about the possibility of being unable to make such important decisions for themselves, having an LPA can be important for your financial wellbeing. It can also give you invaluable peace of mind to know that your affairs will be dealt with in a way that aligns with your wishes, even if the worst should happen.
3. Make sure you have the right protection in place
If you haven’t already done so, another useful financial resolution you can make is to ensure that you have the right forms of financial protection in place.
The coronavirus pandemic has demonstrated that illness can happen at any time. If you don’t have cover, a prolonged period of illness can have a serious impact on your financial wellbeing.
This is particularly true if you’re the main or only earner in your household, as being unable to work due to illness can put a lot of financial strain on your loved ones.
Having protection in place can be a good way to give yourself peace of mind, allowing you to rest easy knowing that you’ll be able to overcome any disruptions to your finances.
4. Make sure you have an up-to-date will
Nobody likes to dwell on thoughts of their own mortality but having a will in place can be a good way to prepare in case the worst should happen.
If you don’t already have a will, now is a good time to sit down and organise one. If you were to pass away without a will there is no guarantee that your estate will be divided according to your wishes.
If you do have one, you should take the time to review it to ensure that it still aligns with your wishes. Your life may have changed significantly since it was written, as events such as marriage, divorce, and births can all change your priorities.
5. Book your regular review
If you want to ensure that you’re on track to reach your goals, it’s important that you regularly review your finances with your adviser.
This is particularly true if you’re approaching retirement, as a 2019 study by the International Longevity Centre found that clients who had an ongoing relationship with their financial adviser typically had better financial outcomes.
A regular review can help you to make sure you’re using your allowances effectively to grow your wealth, giving you peace of mind to know that you’ll be able to meet your financial goals.
Get in touch
If you’d like to get your finances into a healthier shape for the new financial year, get in touch. Please email firstname.lastname@example.org or call 0115 933 8433.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances. The Financial Conduct Authority does not regulate Will Writing.