Lockdown has had an impact on our all of our lives since the beginning of the pandemic. We’ve changed the way we go to work, interact with other people and spend our money. Now that restrictions are being eased and we return to a somewhat normal state, we’re taking a look at just how much Brits have managed to save over the past 18 months.
If you have been lucky enough to build up a savings pot (thanks to all those saved train fares), we’ve got the top tips on the best places to park your spare cash in a post-lockdown world.
What is disposable income?
Disposable income is the money that you can afford to spend once you’ve covered all of your bills, transport, food, clothing and other necessities in a single pay cycle. It’s basically the money that you can quite literally dispose of – by spending it on life’s ‘extras’ – without experiencing a decline in your standard of living. 💸
Do people have more savings because of Covid-19?
A report by the Bank of England (BoE) back in November 2020 showed that middle-income households, higher-income households and retirees had increased their savings pots as a result of Covid-19.
That’s largely because for these people, their incomes have remained unchanged but their monthly spending has dropped dramatically due to lockdown. So, the money that they would have otherwise disposed of is sitting in their bank accounts instead. In fact, the BoE estimated that UK households had saved £125 billion by November 2020. 💰
But, as people start to get out and spend more, we’re seeing inflation rise, meaning these savings are in danger of losing their value (known as depreciation). The report also stated that 70% of the people that had saved in lockdown planned to keep the money in their bank accounts. 😬
How can you beat inflation?
To beat inflation, the interest rate that you’re receiving on your cash savings should be higher than the current rate of inflation. As of 18 August 2021, your interest rate would have needed to be higher than 2.0% just to prevent the value of your cash savings from decreasing. 📉
To comfortably beat inflation and aim for a better return than just breaking even, investing your saved cash could be of interest. For example, our Balanced Starting Option had an average annual return of 8.2% from the end of 2010 to the end of 2020.* That’s far better than even the best-rate current accounts – by a good amount. One of the easiest ways to get started with investing is through a Stocks & Shares ISA. 🏛️
But, remember that past performance is not a reliable guide to future performance and it’s important to note that investing should be regarded as longer term (more than five years). The value of your investments can go up and down.
What is an ISA?
An ISA is an individual savings account, and there are different types available to you – depending on what you’re looking to get out of your ISA, and whether you’ve got a particular saving or investing goal.
Here are the four ISAs that we offer all through the Moneybox app:
- Stocks & Shares ISA: a great way to invest your spare cash into the stock market in an easy, tax-efficient way. You can invest up to £20,000 per tax year into a Stocks & Shares ISA and you won’t pay any tax on your gains. With a Moneybox Stocks & Shares ISA, you’ll invest via tracker funds in a range of global companies like Netflix, Tesla and Google. 📈
- Stocks & Shares Lifetime ISA (LISA): if you’re looking to buy your first home, this could be the ISA for you. Created to help people put the money aside for a house deposit, you can invest up to £4,000 per year into a Stocks & Shares LISA and receive a 25% government bonus on any deposits up to £4,000, meaning you can get £1,000 per year – for free! Moneybox is one of the largest LISA providers and we offer both a Stocks & Shares option as well as a Cash LISA. A withdrawal charge applies if you withdraw your money for anything other than a first-time house purchase (up to the value of £450,000), retirement, or if your account has been open for less than 12 months. 🏡
- Junior ISA (JISA): if you’re looking for a tax-efficient way to save for your child’s future, check out a JISA. You’ll be able to invest up to £9,000 per tax year, and the money can be withdrawn by your child when they turn 18. 🧸 To open a Moneybox JISA, download the Moneybox JISA iOS app. We’re working on bringing our JISA into the main Moneybox app soon.
Please note that the allowances between these different ISAs are shared. So, if you invest £4,000 into a Stocks & Shares LISA, you’ll only be able to invest £16,000 into your Stocks & Shares ISA for that tax year.
How to invest in an ISA
- Download the Moneybox app for iOS or Android
- Create your account in minutes
- Select the ISA that’s right for you
- Set up your deposits – we offer weekly, monthly, roundups and one-offs (you can get started with just £1)
- Monitor your investments at any time in the app
All investing should be regarded as longer term (minimum five years). The value of your investments can go up and down, and you may get back less than you invest. Tax treatment depends on the individual circumstances and may be subject to change in the future.
*Investing returns are based on our Balanced portfolio and include all fees. Where available, returns data for the selected funds have been used. Where the fund has a shortened performance history, we have used the appropriate index to simulate performance. Investing should be regarded as longer term (at least 5 years) and you may get back less than you invest. Past performance is not a reliable guide to future performance. Sources: Morningstar, MSCI.