Perspectives on money are evolving. People in the UK are now engaging in more open and honest conversations about their financial outlooks – and how to enhance them. As we celebrate UK Savings Week, Russell Brett outlines how high earners can increase their assets, without breaking the bank.
There’s been a sizable shift in how we Brits discuss our finances. As Alex Marsh, Head of Klarna UK, explains: “Brits are taking greater control of their personal finances and breaking taboos by being more open with how they manage their money with friends and family”
Research shows that a staggering 79% of millennials are interested in talking about their fiscal solvency with a friend. Globally, the picture is similarly encouraging as almost every other person (47%) says they now feel comfortable talking about money.
This increasingly amenable mindset works in your favour, as many earners are now vocally focusing on profitable strategies to grow their wealth. For instance, nearly a quarter of Brits (23%) are now investing in the stock market; a notable rise from less than a fifth (18%) just a year ago.
So, how can we boost our income and increase savings without taking on too much risk? Ahead of UK Savings Week from September 9th to 15th, here are Matthew Douglas’ top tips to strengthen your financial position.
Invest in bonds and stocks to grow your income
Stocks and bonds are becoming increasingly popular investment options. Currently, more than one in ten (13%) adults in the UK are investing in bonds, even though many Brits aren’t familiar with what bonds actually are!
Given that the bond market is valued at £2.4 billion and expanding, this gap in understanding is utterly alarming. Even among those who know about investment bonds, many fail to fully leverage their potential earnings, with only 25% seeking professional financial advice and many relying on online sources instead.
To enhance their financial portfolios, high-earning individuals should consider working with a wealth management expert to explore ways to increase their returns through strategic investments. Bonds, in particular, require a tailored approach rather than a one-size-fits-all strategy.
There are various bond options available depending on the investment horizon and risk tolerance. For instance, some low-risk bonds might mature in as little as six months, offering a short-term, low-risk gain. In contrast, long-term bonds can take up to 10 years to mature but generally offer higher yields, albeit with associated risks due to the extended investment period. In this respect, it’s vital to balance the inherent risk against the potential rewards.
Leverage the power of compound interest
Essentially, compound interest acts like the opposite of inflation for your savings. By making smart investments now and understanding your risk tolerance, you can watch your funds grow by utilising the incredible accruals of compounded interest over time.
As your savings generate interest, you begin earning interest on that interest, in addition to the original investment, allowing your funds to grow even faster.
To make the most of compound interest, it’s important to start saving early, contribute regularly, and maintain consistency in your savings.
Additionally, reinvesting your earnings can boost your returns, so it’s crucial to select your investments carefully – and never assume continuity from a previously successful investment.
Always seek advice from a licensed financial adviser, outline your desired risk threshold and timeframe – and, of course, steer clear of the increasingly visible online speculation by ‘finfluencers’ (financial influencers). These are not only dangerous but are now being actively prosecuted by the Financial Conduct Authority.
Maximise your tax-free savings allowances
An effective way to grow your savings without any degree of risk is by taking full advantage of your annual tax-free savings allowance, which lets you save up to £20,000 each year without paying tax.
By putting your money into an ISA and utilising this allowance instead of regular savings accounts, you can significantly reduce the tax impact on your liabilities. This approach helps to ease the burden of taxation on your wealth and sets the stage for a more secure financial future.
Even better, this is a yearly benefit – not a one-time opportunity. ISA tax allowances reset annually, allowing you to continue enjoying these tax advantages. UK savers have until April 5th to benefit from tax-efficient savings at no extra cost—simply invest in your ISA instead of other options to start seeing the rewards.
If you’d like to amplify your assets by harnessing the power of compound interest or are looking to make sense of the different levels of risk in investing, make sure to speak with a registered IFA.
Whether you’re entering the workforce, building your career, considering or entering retirement, or perhaps are actively enjoying your later retirement, get in touch with our specialist team today to discuss the most practical solutions for you.