11 September 2020

Pearls of (financial) wisdom

We are passionate about helping to teach children and young people about money and since 2019, 20,000 young people have received financial education and careers based lessons as part of our commitment to supporting schools in the teaching of financial education.

In September 2014, it became compulsory to teach financial education in secondary schools in England and Wales. Although a welcome step forward, it does mean that the majority of adults across the country have missed out - leaving them with lots of unanswered questions.

Many without this financial education have turned to search engines. Here we answer some of the questions UK adults have asked about money, bringing the most common queries about money management and finance into one place.

 

How do I save money?

If your incomings exceed your outgoings, you might think it’s smart to save for a rainy day. Perhaps you have a goal in mind, such as saving for a deposit for a new home. If you’re wondering how to save money, there are a few options that could help you on your way.

It is possible to save money in a current account, but there are savings options that will make your money go further. It’s also easier to manage your savings if they’re kept in a separate pot.

For instance, instant access savings accounts tend to give preferential interest over current accounts. If you can afford to lock away your money for a set amount of time, fixed-term savings and bonds are likely to attract more interest still.

An additional option is keeping money in an individual savings account, or ISA. One of the principal advantages of an ISA is that any return you make on your investment is tax-free.

Do any of these options sound appealing? Read our top 10 tips to saving to find out more.

 

What is a standing order?

A standing order is a payment you arrange with your bank, which will transfer money to a payee at chosen intervals.

So what’s the difference between a standing order and a direct debit? Well, a standing order is an instruction to your bank to pay the amount you specify on the date you choose (known as a push payment). On the other hand, a direct debit authorises a company or organisation to take money directly from your account when it’s due (a pull payment).

In a sense, a direct debit is more formal. You tend to pay utilities by direct debit, for instance. Whereas you might organise a standing order to pay money into someone’s account every year on their birthday. It’s also common for people to pay their rent this way.

How do I transfer money?

Bank accounts usually have facilities to transfer money to others such as family or friends, or businesses. You might do this in branch, although making transfers online or over the phone tends to be quicker and easier.

To make the transfer, you’ll need the name that the account’s in, the payee’s sort code and account number. You then tell the bank when you’d like the payment to be made, and the amount you’re paying.

How long it takes to transfer money can vary, but is often done immediately. Most banks use a system called Faster Payments, which is free to use. Payment is usually instant, but can take up to two hours.

 

Can I withdraw money from a credit card?

It’s usually possible to make a withdrawal from a cash machine using a credit card. However, just because you can, doesn’t mean you should. Credit card issuers usually charge fees for withdrawing money, whereas withdrawals from a current account are free unless the ATM stipulates otherwise.

Frequent cash withdrawals using a credit card may also adversely affect your credit rating. This is because it looks to lenders like you’re having trouble managing your cashflow.

It’s always a good idea to familiarise yourself with your credit card’s terms and conditions, so you can manage its use effectively.

 

What is my credit rating?

A credit rating is a numerical score that financial institutions can refer to when deciding whether to give you credit. This score is based on your credit history, which is a record of your ability to pay off debt - for example, whether you make your minimum credit card repayment each month, and pay household bills on time.

Your score is used as one of the eligibility criteria for offering you further credit. A good score means you’re likely to be able to borrow more easily, as you’re seen as a safer bet.

To complicate things, there’s no universal credit rating for people in the UK. Organisations can refer to any of three ratings, scored separately by Equifax (which scores from 0-700), Experian (0-999) and TransUnion (0-710).

Published: 11/09/2020