WTF is an ISA and do I need one?!
WTF IS THIS BLOG ABOUT!?
No idea where to put your savings? An ISA is a good shout - it's an account that lets you save money tax free 😲
In this blog, I'm giving you the low down on ISAs - what they are, why you need one and how tf you open an account 🤓
Did you know that any cash you have sitting in your bank account is probably losing money!? That's because atm interest rates (i.e. the money a bank will give you for stashing your cash with them) are less than inflation (i.e. the cost of things getting more expensive). If you wanna know more, check this blog out.
I know, it sucks! But don't stress 'cause you can move your money to an ISA (AKA an individual savings account) to make your savings work as hard as you do.
WTF IS AN ISA?
An ISA is basically a legal tax loophole - it lets you save and invest your money 100% tax free - #winning! 🔥There are a few different types of ISAs available, depending on what you're saving for. I'll explain what these are below but, before I do, there's a couple of things you need to know:
You can have multiple ISAs but you're only allowed to pay into one of each type per tax year.
You can save up to £20k per tax year across your ISAs (the tax year runs to 5 April 2021 - use it or lose it, sista).
WHAT DIFFERENT TYPES OF ISAS ARE THERE?
There are five different types of ISAs - I like to think of them as the different types of trousers that make up your capsule wardrobe 💃
1. Cash ISA AKA jeans: this is a wardrobe essential, which you'll wear on the regs.
A Cash ISA works pretty much the same as a bank account (i.e. you put money in and it sits there patiently waiting for you). The only difference is that a Cash ISA will probs pay you more interest than a bank account would.
There's two main types of Cash ISA:
Easy access: this means you can take your money out whenever you want. The interest rates will likely be better than a bank account, but not by much.
Fixed rate: these ISAs will lock your money away for a set period of time (i.e. three years) in return for a higher interest rate.
Easy access Cash ISAs are a great place to store your emergency fund or to save for short-term money goals (i.e. a holiday). I'd recommend using this site to find the best deals - it's updated daily 🙌
2. Stocks & Shares ISA AKA leather** trousers: you're not gonna wear these everyday, but they can be a great addition to your wardrobe if you're feeling a little boujee.
A Stocks & Shares ISA should be your go-to if you're looking to start investing. They're a great place to save for long term goals (i.e. things you want to buy in 5+ years time). There are a few different types of Stocks & Shares ISAs (check out this blog if you wanna find out more) but if you're a newbie investor, then a robo-advisor is a good place to start - they make investing easy peasy.
I personally use Nutmeg* (use this link for 6 months free fees) - they're awesome and let you set-up an account in less than 5 mins!
**They're faux, let's face it (unless you're an absolute baller).
3. Lifetime ISA AKA suit trousers: you wear these when you mean business. You know exactly what you want and you're pulling out all the stops to get it.
Lifetime ISAs are the best place to save if you're looking to buy your first house (worth less than £450k). You can save up to £4k a year and the government will give you a 25% bonus - this means you can earn up to £1k per year for FREE! 🤑
Lifetime ISAs are available as Cash or Stocks & Shares versions. You can open a Lifetime ISA with Nutmeg* (use this link for 6 months free fees), or visit this site to compare your options with other providers.
4. Innovative Finance ISA AKA hot pants: these aren't for everyone, but if you've got the risk appetite (and the legs 😂), you do you boo!
Innovative Finance ISAs are peer-to-peer lending. This basically means that you lend money to people and companies and they pay that money back with interest (usually higher than the interest you'd earn on a Cash ISA, but at a far greater risk). Unlike most ISAs, these aren't protected by the FCSC (meaning you can lose your money if the provider goes bust).
5. Junior ISA AKA babygrow: these aren't for you obvs, but are great if you have a kid.
Want to put some money aside for your kid? A Junior ISA lets you save/invest up to £9k per year tax free! This is the perfect way to save a nice little stash for your kid to spend on a car, a house or travelling when they reach the ripe old age of 18.
If you have some savings but aren't sure where to put them, ISAs are a great shout. Just remember to choose the right one to suit your #moneygoals. The deadline for making the most of your £20k allowance is 5 April 2021 -so get in there quick (especially if you have a Lifetime ISA - you wanna get your hands on the most free cash possible!)
If you found this blog useful, please share with your family, mates and Tinder dates! And go give me a follow on Insta for more banging content.
*By using this link to open an account, I'll receive a small reward. Note that I only recommend companies that I either use myself or think are the best option out there IMHO.
Now for the serious part: I'm not a qualified financial advisor. My blogs are for educational purposes only - speak to an independent financial advisor for information on your specific circumstances. And remember, investments can go down as well as up.