Another week, another seven days of chaos and confusion in the money markets. And none of it makes life simple for ordinary savers and investors.

So just what SHOULD mortgage borrowers be doing as interest rates tumble. I wish that it were that simple, but it’s a puzzling business for ordinary consumers watching interest rate movements in credit crunch Britain.

Cheers as the Bank of England slashed Base Rate to 3 per cent from 4.5 on the sixth of November, were quickly followed by jeers as most of the big mortgage lenders did precisely …. nothing.

We’ve all got used to a half per cent cut turning into a measly .2 or .3 of a per cent by the time it reaches us. Adding insult to injury, anyone who also has savings will find the banks only too quick to slash the rate on their savings.

The best advice for those looking for a new deal is to sit tight … for a while at least. Those of you lucky enough to be on a tracker rate (where the interest rate on your mortgage is pegged at, for example, 1% over base rate) are lucky. Your mortgage will automatically be following base rate down by 1.5% next month. That’s a nice early Christmas present to go with the half a per cent cut you got in November.

Those on standard variable rates have to trust the generosity of their lenders, and hope that they play fair and reduce their rate accordingly. All I can say to that is GOOD LUCK. The SVR is the rate your lender sticks you on once your fix or tracker lapses … it’s a kind of inertia selling, and the banks know most of us are rubbish about checking on this sort of thing. Those on the SVR tend to be the least financially aware – and so they tend to get the worst financial deal of all.

That meant that even after the base rate cut to 3%, the average SVR was 6.79% … more than twice the base rate, an astonishing markup for the banks. Admittedly, after Alastair Darling pulled the banks in and demanded they pass the cuts on, Halifax, Nationwide, Royal Bank of Scotland and NatWest, all said they would be reducing their standard variable rate by 1.5 per cent.

However, that means you’re STILL only getting 5.29%, which is a pretty rubbish rate when base is 3%. You SHOULD be looking for a better deal. But again, it’s been tough to find one. The lenders have been pulling most of the tracker deals – you can see why, as a tracker automatically cuts the bank’s margin as rates fall. And as for fixed deals … well even a day after the cut in interest rates, the cheapest fix was STILL around 5.25%. Those of us who are already on fixed rates can find the fall in interest rates a bittersweet experience. You are, relatively at least, losing out.

The BIG advantage of fixed rates is certainty of course. If rates go up, you’re protected. If rates fall, you at least have the security of knowing what you’ll be paying each month. But of course, we’re most of us greedy. And that lovely secure fixed rate can look a bit ropey when you’re still paying 6 per cent.

However, those on a fix should savour the security, and look forward to better deals in the coming months. Rates ARE going to start to fall as credit frees up, as free up it must. Beware though. The fall in house prices may have reduced your equity and thus increased the loan to value of your home. So if you had a £100,000 mortgage on a £200,000 home, but your property value has dropped to £150,000, then your LTV has risen from 50% to 66%, and that could mean a higher interest rate on your new mortgage.

If you can wait do. And while you’re waiting, here is some groundwork you can be doing to get the best deal. Make sure your credit history is rock solid before you apply. Check it with Experian or one of the other credit agencies and act to repair any problems. I’ll have more on repairing dodgy credit in a couple of weeks. Make sure you’re on the electoral roll too … it all helps.

Save! Ensure you can put down the biggest possible deposit. You’ll get a better rate, and you have a better chance of getting a mortgage full stop. Don’t change your job now if you can help it. A thick sheaf of payslips from the same employer will impress the lenders, as will plenty of healthy looking bank statements. And don’t move either … a long period at the same address is a big tick in the lending box. This last bit of advice may ring a bit hollow if you’re looking for the mortgage BECAUSE you’re moving of course!

Some of the best deals are back with brokers now … that wasn’t the case a month or two back. Get a broker who can sell from the whole market (not all of them do). Read the small print on the terms and conditions they send you. Read the small print on arrangement fees, redemption penalties, terms of the mortgage, the lot. Which is better, 6% but no arrangement fee, or 5% with a £1000 arrangement fee? Not sure? Then you haven’t done enough research!

Don’t ignore your current lender. You know what – they might just negotiate rather than lose you. Though don’t count on it, some lenders are muleishly stupid and shortsighted on this stuff. But most of all … keep checking! Deals are changing by the day and some aren’t around very long. A regular check on the best buy tables on moneysupermarket.com, moneyfacts.co.uk or godirect.co.uk will keep you in the picture.

Credit checks: Experian, Equifax
Mortgage rates: Moneyfacts, Go Direct, Moneysuperrmarket

Tags: Mortgage rate advice, Mortgage rate advice article, Mortgage rate advice, Mortgage rate advice article, Mortgages, mortgage, rates, personal financial advice

Money saving extras … Tough and confusing times for UK consumers just now. Interest rates may be falling but mortgage and loan rates are slow to follow them down (although the hefty prod given the banks by Chancellor Alastair Darling has been very welcome). Meanwhile, the banks have been indecent in their haste to cut the rates on savings accounts. The sight of the banks having their cake and eating it is galling for those of us who are relying on saving for our old age, or for those pensioners desperately trying to eke out their savings pot.

This is the horror scenario for many UK consumers. Your outgoings are stubbornly high (the declining cost of commodities shows no sign of filtering through to gas and electricity prices or the cost of groceries in the shops). You can’t raise your income (with recession biting over the next year or two, few of us will be in much of a position to ask for a pay rise). That leaves one avenue alone … looking for some money saving extras to make your weekly disposable go a day or two further. There are limits here – we can’t all live on grass and move to a cave, even if we wanted to, but here are ten quick tips to save cash.

Money saving extras top 5

1. Move onto a cheaper gas or electricity tariff … it still won’t be cheap, but if you haven’t changed for a year or more, you won’t be getting the best deal.
2. Check out cheaper mortgage deals. Again, the lenders aren’t exactly queuing up to lend just now, but if you are on your bank’s standard variable rate (SVR) you certainly AREN’T getting the best deal.
3. Shop around. LIDL, Primark, Netto … all offer good, affordable alternatives to the upper scale high street. A family could save hundreds of pounds a year by moving downmarket – and downmarket doesn’t have to mean worse.
4. Make do and mend. Don’t throw stuff away, fix it. And try swapping with friends and neighbours. Boot sales and jumble sales have never seemed such a good idea.
5. Buy less. You don’t have to refloat the economy single handed. Question every purchase …. you’ll be surprised how little you need.

Tags: money saving, cost cutting, economising

Related: Moneysaving articles

So what is the interest rate? I was asked this question by an exasperated friend this week who, having spent weeks casting around for a mortgage, was mortified to find all the best rates being withdrawn just as the Bank of England cut Base Rate from 4.5% to 3% this week – the biggest cut since the early 1980s, and resulting in the lowest base rate since 1955. The same friend had already had an ‘in principle’ mortgage with the Halifax withdrawn at the eleventh hour, despite having paid for a survey on the property (it came back with a favourable report) and only asking for a 75% mortgage.  Yet this good risk (by most criteria I could see) had the rug pulled and, trying to find a new deal, discovered that lenders were still offering around 6%.

The point is of course that there isn’t one interest rate. There is the much talked of ‘base rate’, currently at 3%, and this is the rate (plus a small premium) that the banks borrow money ‘wholesale’. They then lend that money on to you, in the form of mortgages and other loans. And they make a margin on this – fair enough, they are businesses. Most of us are quite happy to pay this, when the banks are borrowing at 5% as they were a year or two ago and lending it to you at 6%. In fact, in the heady days of lending, you could often get a fix at below the then current base rate, as they would use this as a loss leader, to hook you in. After your term was up, they would rely on customer inertia to see you slipping unnoticed onto the standard variable rate.

But when they are borrowing at 3% and lending at 6%, we are not simply seeing an historically high gap between base and lending rates, we’re also seeing astonishing markups – 100% in the above case. There are a number of reasons for this. The freeze in credit means that it’s hard for the banks to borrow money from each other, and that makes the interbank lending rate (LIBOR) rise. So they are borrowing at much above base before they can lend to you. These illiquid and poorly capitalised banks are also trying to rebuild their balance sheets, get more cash on board in other words, so they are hoarding the stuff. Nobody wants to be the next Northern Rock and suffer a run on assets. All these factors make the interest rate rise. And all conspire to make that mouthwatering 3% or anything near it just a dream for ordinary borrowers. In answer to my friend’s question – the interest rate is the one you can get!

A few months ago I was regularly having conversations with people who said: ‘credit crunch? Nah … won’t affect what MY company does!‘ But it isn’t just city bankers who are being shown the door now, and things could be a lot bleaker during 2009. So … how DO you protect yourself if redundancy strikes? Here is some Redundancy advice free to listeners and readers of Wallet Watcher.

As ever, forward planning is the key. Don’t bury your head in the sand and don’t assume it can’t happen to you. Many of us wait until we’re already in trouble before we make a plan. It could already be too late to save your house by that point, and panic is never a good ally when you’re trying to be coolly strategic.

The second thing, in the words of Joe Strummer, is ‘Know Your Rights‘. Work that system for all it’s worth … you’ve paid enough tax into it over the years after all. Some statistics first. Around 1.8m in Britain are now officially unemployed. Though cynics will point to the number of long-term sickness benefit claimants in the UK, and say the number is already much higher. By the end of 2009, many are saying we’re going to have 3m on the dole.

Now your rights, and you have a major advantage if you work for a larger company. If the firm employs 20 people or more, it MUST consult the union before it gives anyone notice. This will be a staff rep if it’s a non-union organisation, but either way. Remember my redundancy advice UK readers – IT’S THE LAW! They can’t just ignore this. And they HAVE to give 30 days notice …. 90 days if more than 100 people are to go. You can’t refuse to go unfortunately, but they DO have to pay you.

Don’t get too excited, redundancy pay is a lot meaner than it was last time we had a major recession. If you’ve been there two years or more you’ll get half a week’s pay for each year of complete service if you are under 22, a full week up to age 40, and 10 days if you are 41 or over.

But CHECK your contract! You may find you’ve waived this right when you signed up (though you almost certainly didn’t notice, who does!) Conversely, your firm may offer better deals than the statutory minimum, and remember that the first £30,000 is tax free. So a tax rebate should be on its way to you. You won’t be surprised to hear that the taxman has tightened up on things though. To ensure you do get your cash tax free, you must be genuinely redundant. Getting sacked doesn’t count, nor does ‘gardening leave, nor does a pay-off in lieu of notice … Remember redundancy doesn’t mean YOU losing your job, it means the JOB has to disappear.

What if you get more than £30,000? Well lucky you. You can shield the excess from tax by putting it into your pension … and that also has the benefit of future planning. This is money you can’t now spend! Pensions may look like poison at the moment (blame the stockmarket) but the value of shares will rebound over time. So as long as you’re not retiring in the next few years, this could be a very good time to salt away a tax free sum.

Do you have unemployment or redundancy insurance? If not it may be the time to buy it. And check existing life insurance policies you ALREADY have … you may be surprised to find you’re already covered! It may not be much, but it could keep you afloat.

Now could be a good time to think laterally. Even if your employer is a two-man band, with you playing the trumpet, all is not lost. Try negotiating with your boss, as he probably wants to keep the show on the road too. Maybe he can cut you down to one day a week rather than killing your job altogether. That way, there’s less disruption to his business, and you keep SOME money coming in. In your new and unwanted free time, you can look for other part time work. The old irony. Just as it’s easier to borrow money from banks when you’re rich, it’s MUCH easier finding a job when you’re still in one.

Finally, planning ahead again. This could be a very good time to audit your skills. Portfolio working was a buzzword a few years ago, but it could be making a comeback. I’ll be looking at turning your expertise into hard cash in a fortnight’s time. And if you haven’t done it yet … construct that household budget! Saving money has NEVER been such a good idea. I’ll have lots of ideas for you on THAT one next week.

Tags: Redundancy advice, Redundancy advice article, Redundancy advice article, redundancy, redundancy advice free, redundancy advice UK, personal financial advice

With recession looming and everyone increasingly watching the pennies, it seems remarkable that there should be any cash lying around unclaimed. But forget fishing down the back of the sofa for pennies, this is big stuff. Four years ago the then Chancellor of the Exchequer, Gordon Brown announced that there was some £500m lying ‘dormant‘ in UK building societies and banks.

How, you may ask, can this happen. Well there’s an old Scottish saying that Gordon will be familiar with ‘many a mickle maks a muckle‘. Many little things add up to a big thing, in plain English. And this half a billion quid is made up of lots of little things … money forgotten in moribund bank and building society accounts, old insurance plans, share certificates, and cash in National Savings accounts.

Typically the sums are small, a few pounds in some cases. Often the customer has moved on and not cleared their old current account. Sometimes the person has died and the account has been missed by their family. Now Gordon’s plan is to snatch those millions and use it as the core of a charity to do good works. We have no problem with that – better than using it to prop up the Exchequer’s flagging finances. But how much better if you could claim any of that cash that belongs to you, before it disappears forever.

Banks reckon they have between £250 and £300m sitting unclaimed. This has accumulated amongst 500 British banks over the last century. Obviously there aren’t that many UK banks now. Most have been swallowed up by bigger and bigger banks down the years. There are now 42 banks and all are signed up to a scheme to reunite customers with their cash. This includes all the big high street names, which between them have access to all UK clearing bank accounts going back to the year 1900. If you think you or yours have a moribund account, contact mylostaccount for details on how to claim.

Building societies have consolidated even more furiously down the years. A century ago there were 1500 of them, now just 59. But all have signed up to mylostaccount. With an estimated £130m or more lying unclaimed in building society accounts, it has to be worth a pop.

Thousands of us buy life insurance and pension policies yet never claim on them. The companies reckon there is around £100m unclaimed on life policies and £300m on pension policies which have never paid out. Go to the Unclaimed Assets Register, or UAR, for more. The Pension Service should also be able to help.

And while we hear a lot about benefit abuse, the big story is the amount of benefits we DON’T claim. The Department of Work and Pensions reckons around £10bn of means-tested benefits go unclaimed each year, including pensions, council tax and housing benefits. Go to Citizens Advice or HM Revenue and Customs.

We looked at the supersafe haven of National Savings & Investments a couple of weeks ago. The problem is, loads of us pop our money into NS&I and promptly forget all about it. The figure unclaimed, including savings accounts, unclaimed premium bonds and their prizes, is staggering … over a billion pounds! Okay, the average balance in moribund Ordinary Accounts is a measly 19p … but even these accounts add up to £200m altogether. You’ll find the URL for the National Savings tracing service on the blog.

The plunge in share prices is bad enough without you simply losing your shares. But that’s what loads of us do. Buy them, then move without a forwarding address. Or simply forget we owned them. Many people die owning shares their families know nothing about of course. The total sum unclaimed is at least £12bn … and that’s before you factor in the dividend payments! The Association of Investment Companies (or AIC) can help you track down lost shares.

We’ve all heard about unclaimed Lottery prizes. After a while they lapse, though at any one time there are millions of pouns unclaimed. But this is dwarfed by the £31m of unclaimed Premium Bond prizes. There’s no point having this supersafe investment if you’re not checking your numbers! You can catch up on the winners at the National Savings website.

Related: www.mylostaccount.org.uk, www.nsandi.com, www.theaic.co.uk, www.uar.co.uk, www.thepensionservice.gov.uk, Citizens Advice, HM Revenue and Customs

Tags: Reclaiming dormant cash, Reclaiming dormant cash article, Reclaiming dormant cash features, Reclaiming dormant cash article, Reclaiming dormant cash, domant funds, dormant insurance plans, share certificates, National Savings accounts, personal financial advice

It’s got to be one of the biggest scams of all time, and all of us fall for it. Any car that reaches its third birthday becomes due for its first MOT test. And, surprise surprise, when you do take the car in, you’ll invariably find that it needs new brake pads, work on the suspension or steering, or some other glitch you didn’t know existed.

Yet you’ve been driving a car that, as far as you can see, is running absolutely fine. Now I’m not saying all garages are at it – the vast majority are probably decent and honest. And of course drivers like me, who don’t even know where the catch is to release the bonnet, aren’t necessarily going to know there is anything wrong.

But that’s just the problem. If we don’t know, we can never be entirely sure if the garage is playing it straight or just charging you for work that doesn’t really need doing. Even worse, you can’t be totally sure that the work was actually done.

What you need is a test centre without a vested interest in selling you parts.

And most people don’t realise that there is such as thing. In fact, local authorities across the UK run their own MOT test centres. The best way to find yours is to Google the phrase ‘Southwark Council MOT test centre‘ (obviously putting in the name of your own local authority here). Or simply find the website of your local authority, and get the link from there.

The great thing is that these centres DON’T do repairs, so they have no incentive to fail you unfairly and flog you parts you don’t need. They DO have a reputation for strict adherence to the Ministry’s testing standards though.

While you’re at it, think about your other regular motoring expenses. We’ve been constant supporters on this site of petrolprices.com. This marvellously simple website simply asks you to enter your postcode, and the clever database will quickly supply you with the cheapest petrol stations in your area, with prices per litre listed. If you burn a lot of fuel then it’s well worth signing up for their regular newsletter.

Don’t just renew your car insurance with the same company each year … you will NOT get the best deal. There are a host of excellent price comparison sites for insurance, including moneysupermarket.com confused.com and gocompare.com. Running a price comparison on all three should take you less than half an hour – a reasonable investment when you could save hundreds of pounds.

The same goes for breakdown cover. If you are buying it from your regular insurer then you’re probably losing out. Again, use a price comparison site to find the best deal.

Do the same for finance if you’re buying a new car, and learn the tricks on getting a rockbottom price on a new motor. That last one is an artform in itself …

There are fantastic deals to be had on new and nearly new cars at the moment. Take a look at the newspapers and you’ll see that all the big car makers, including Toyota and Vauxhall, are laying off workers in the UK, as they simply can’t sell enough motors.

It’s all part of the growing recession engulfing the economy, but there is a bright side – you should be able to really haggle hard for that shiny new motor you want, as the dealer is almost certainly desperate to sell.

But don’t just think new. We all know that a car loses a huge chunk of its resale value the moment it moves off the forecourt for the first time, so why not go for a nearly new car. Buy a three month old model with 2000 miles on the clock and you could save a third off the new price. And try the big discount brokers, such as jamjar.com, UKcarbroker.co.uk and dealdrivers.co.uk. These supermarkets offer great discounts against the regular highstreet dealers.

Related: www.jamjar.com, www.ukcarbroker.co.uk, www.dealdrivers.co.uk

Tags: Save with council MOT test centres, MOT, M.O.T., save money, MOT test, council MOT test, council MOT center, personal financial advice

Last week I looked at the safest haven of all for your cash in today’s turbulent financial markets. Boring and all the better for it, National Savings and Investments are that rare deal – a bank that CANNOT go bust. That’s because they are underwritten by the UK Government.

Safe certainly, but the price you pay is rock bottom rates of interest. But even in today’s chaotic markets, some principles remain. And the prime tenet of ANY investment portfolio is to have a balance of risk. Your banker investments deliver security and minimal growth, while at the other end you want riskier investments that will multiply each year. So assuming you have some money you can afford to risk, I look at some alternative places you could be stashing it this year.

An interesting punt could be on zopa.com. This social lending website puts together those who want to borrow cash with those who want to lend it, cutting out the banks. This ‘peer to peer’ lender launched in March 2005 and allows you to lend from as little as £10. Since the website opened, more than £26m has been lent (and of course borrowed). Go onto the website and you’ll see people looking for loans and other people offering money to borrow. You decide the rate of interest you want and the level of risk you choose (higher risk goes hand in hand with a higher return of course). Zopa borrowers are graded by how risky they are. And between borrower and lender a market is made. Many people like to lend this way because they know they are helping borrowers out directly and quickly. And of course it’s a very efficient way to get money moving around. But self interest plays the greatest role, reasonably enough.

With the shortage of money available on the financial markets, interest rates on unsecured personal loans have been rocketing. And that’s meant that the average rate of interest on Zopa has rocketed from around 8% to 10% in the last year. Your risk is reduced, as loans over £500 are spread across at least 50 borrowers.

Gold and silver are traditionally seen as safe havens for cash, though languished rather until recent years. Uncertainty in the markets always sees people piling back into precious metals though, and gold hit $1000 an ounce this year. It’s fallen back a little since, though every blast of bad news sees the price spike a little. The argument against gold is that it has no intrinsic value. Then again … somebody will always buy it, which is more than you can say for some shares and properties at the moment.

However we’re not going to ignore shares. Who knows where the FTSE 100 will stop falling. I don’t and neither does anyone else. However it’s a fact that lying at its lowest level for four years, it probably has further to climb than to fall. The FTSE currently lies just below 5000 points, yet a year ago it was over 6600. I wouldn’t suggest putting all your money in a tracker (though with dividends reinvested it could give you a solid income), but the pressure down on the stockmarket means a lot of very sound companies have had their share prices artificially depressed. Do your research and buy conservatively and you will pick up some real bargains now. As one pundit said recently ‘Everyone was buying last year when stocks were obviously overpriced. Now they’re all selling when stocks are obviously cheap … work that one out.’

And then there’s the other toxic investment of 2008. Property. Don’t touch it with anyone else’s cash, let alone your own, according to the pundits. Some say prices will fall 25% or more … some say that it already has. But always remember that all property is not equal. Barratte may be slashing the price of its newbuild apartments in northern cities, but then it built far too many of them in the first place. Keep scouring property websites such as rightmove.co.uk and you will find people desperate to sell, and many of them very eager to slash prices. Do your maths, ensure you’ll get a rent that will cover all your mortgage costs, and you could bag some real long term rental bargains. Then forget about the selling price for the next five years and, next time you look, it should be worth more than you paid for it.

Finally, the best investment you can ever make in turbulent times is to pay down your debt. Reduce your borrowings on expensive credit cards for a start. Pay off any personal loans. But most of all, pay off as much of your mortgage as you can. With interest rates still low, it’s easier currently than it has been historically. If house prices do fall, then it’s important to get yourself out of the risk of negative equity. While if they rise (unlikely at present) you’ll be laughing … as you increase your equity.

Related: www.zopa.com, www.rightmove.co.uk

Tags: Safer returns on your cash, Safer returns on your cash article, zopa, safe investing, safe havens, interest, safe returns, returns on investment, personal financial advice

In the last few days and weeks we’ve seen Bradford and Bingley nationalised to join Northern Rock, HBOS rescued by a shotgun wedding to LloydsTSB, and that’s just on this side of the pond. Lehmans, Wachovia, Washington Mutual … the list goes on. Which does raise the question – if the banks are going under where IS your money safe?

The nightmare vision in the City and on Wall Street is of people queueing up to withdraw their cash. It’s a nightmare because there isn’t enough to go round if everybody went to the cashline at once. But then what? Stick it in under the pillow? Joking apart, that’s a rotten idea for several reasons. Firstly there’s inflation. 4% and rising. Withdraw your £1000 from the bank and keep it in cash and, within a year, it’s worth just £960. The year after it’s down to £920. Second, it’s risky … get burgled and you’ll find it very hard to reclaim the cash under your household insurance.

The fact is, to protect your savings you need to be earning interest. And to earn interest you have to stick the cash in a bank of some sort. This week we look at Britain’s SAFEST bank, National Savings and Investments. Underwritten by the Government and with a cast iron guarantee. ‘There is no way you could lose your money,’ according to a spokesperson this week. Clear enough?

They don’t get any more solid and boring than NS&I, but solid and boring is just the ticket in these turbulent times. Check out the front page of the website and you’ll see the legend ‘100% security for your money‘. Sounds just the ticket and, unsurprisingly, savers have been piling into this safe haven over the past few weeks. Look at the website and you’ll see a checklist of what National Savings can offer, and they have plenty of products. There are instant savings accounts, children’s bonus bonds, fixed interest savings certificates and guaranteed income bonds. So whether you’re saving for yourself or your kids, locking away money for the long term or need to be able to withdraw at any time … there’s something for you.

What you WON’T get of course is a top rate of interest. There’s a solid principle in saving that the riskier the investment the better the return … And we’ve all seen where THAT has got the western financial system in the last year or so. The interest rates on National Savings start at just 1.85 per cent gross for the Instant Savings account, on deposits of £100 or more. You get a cash card, so you can make withdrawals at cash machines. But for goodness sake make sure they’re free cash machines, not the rip-off dispensers that you find in a lot of convenience stores.

You can also use the card to pay in cash at post offices. Rates do rise with bigger deposits, though even deposits of £50,000 or more top out at 4.4%. But you’re buying security not price.Rates are better on the National Savings Direct ISA, paying 5.3% and of course it’s tax free. You’ll need £1000 to open an account. Moving up, a good hedge against inflation is the National Savings Index Linked Savings Certificate. The product guarantees to rise in line with inflation and gives tax free interest – very good for higher rate taxpayers.

You do have to lock your cash up for either three or five years, but it currently delivers 9.5% for higher rate tax payers. You can invest as little as £100 and up to £15,000 for each issue of these certificates. What you have to realise is that these long term products price in future interest rates – so the rate you get now anticipates the interest rate a year or two down the line. It’s a fair bet that, even with inflation on the up, interest rates are going to come down. With the US and Europe heading into recession, the central banks simply HAVE to cut rates to give the economy a nudge. So children’s bonus bonds that were giving 5.1% a year ago are now down at 3.7%. Again though … it’s all about safety. But even as the markets go into meltdown you HAVE to look to growth and the future.

Related: National Savings official site

Tags: National Savings, National Savings article, National Savings and Investments review, National Savings article, National Savings, personal financial advice

As the academic year starts again, thousands of Britons are heading off to university for the first time. For many students it’s going to be a shock. Even the best organised will end up in debt at the end of their studies, but most of us aren’t very well organised at 18 … especially as it’s the first time we’ve been responsible for our own finances. Rent, grocery shopping and bills – all unknown territory for most teens. So what do you do to stop yourself getting into trouble and keep yourself at least close to the black.

Of course, NOBODY should get to 18 not understanding money and how it works. It’s ridiculous that personal finance isn’t taught as a core part of the National Curriculum. A student can leave school with a ‘A’ level in economics, understanding supply and demand, GNP and money supply, yet not understand the fundamentals of money management.

The other problem is that parents of students don’t really understand the way it works these days. Thirty years ago, when I was a student, we had to struggle on a pretty miserly grant, but there was limited opportunity for getting in debt … banks just wouldn’t give you much of an overdraft. We could also sign on for dole money during the holidays.

Today, students have a raft of grants and loans available. Accommodation standards are a lot better too, and so students can live in a great deal more comfort than their parents did. That’s great … but of course it all has to be repaid at some point. As you could, conceivably, leave university £20,000 in debt, it’s important you take control of your finances from the start.

The crucial thing, and this goes for any of us trying to live within our means, is to draw up a budget, giving yourself a set amount of money to live on for each week. Otherwise, those on limited grants can simply run out of cash before they run out of weeks in the term. While those who do have access to more funds will simply see overdrafts spiralling out of control.

You need to have all your income on one side of the balance sheet, all your expenses on the other. The very act of making a budget tends to focus the mind and rein in excess spending, so make sure you’re fastidious about this. You don’t need to log every Mars Bar you buy … no one should want to develop an unhealthy obsession with money, and there’s really no need. You SHOULD allocate a set weekly amount for spending on comforts and luxuries – getting a fixed sum of cash out of the ATM on Monday morning and disciplining yourself to live within it is a good plan … what you spend it on is up to you.

But you DO need to anticipate EVERYTHING. People proudly show me budgets that have mysteriously missed their mobile phone bills, quarterly electricity bills, any contingency for travel, and so on. If in doubt, overestimate … better to have a little left at the end of term. Some people will breezily dismiss budgeting as a bore and tell you they aren’t that interested in money. Trust me, you’ll spend a lot less time dealing with, thinking about and worrying about money if you budget. The key here is ‘do it once and let the system take care of it’. Don’t budget and you’ll continually be firefighting and getting nasty surprises.

The choice is between spending a morning constructing a budget that will then run pretty much on autopilot, and serve you for three years. Or a nagging feeling that you don’t really understand your finances at all … and bank statements you don’t want to open. It’s your choice!

Of course, you do have to return to your finances every month or so to see how you’re doing. Again, the fact that you have a plan will make this a much easier and less painful exercise. And as things change, you can respond.

The key, you’ll not be surprised to learn, is to make income continue to exceed expenditure. If it doesn’t then you have two options – to raise the first or to cut the second. Now this may seem a stating of the obvious, but it’s apparently not obvious enough for most of us to graps (we Britons have the highest levels of personal debt in Europe remember).

So how to put money into the plus side. Part time working is an obvious option, and many degree courses offer ample time to do this. You don’t want work to be crowding out your study time of course, though ‘working your way through college’ is a tried and true American way of paying for a degree. As a rule, institutions tend to recommend you take on no more than 15 hours a week outside work. Consider selling your unwanted stuff too – ebay is the one everyone thinks of, but Amazon is great for buying and selling secondhand course books.

Back to the other side of the balance sheet, and how to save money. You may find you have to discard many of the luxuries you enjoyed at home – many vegetarians take up the lifestyle as much through frugality as for ethical reasons. For the same reasons, if you can’t cook then learn. And if you do your food shopping at Waitrose then it may be time to get acquainted with Aldi and LIDL.

But there are financial perks to being a student. Make sure you’re getting all the discounts and freebies you’re entitled too. Free banking is just the start – check the best buy tables at moneysupermarket.com for the best deals. But beware of people queueing up to offer you ‘cheap’ credit cards. 0% is great until it stops, but stop it will. Really, the only FINANCIAL advantage to a credit card is the month or so of free credit that you get when you take the card out … and you only get that once, the rest of the time you’re simply repaying last month’s debt. Better to learn to live within your budget.

The studentbeans.com website is a great source of student savings. An NUS Extra card will net you discounts at many big retailers, and check out our regular voucher code deals for big savings on just about everything.

And remember you’re not alone here. Find out if your college has a student finance adviser … your bank branch certainly should.

Tags: Student budgeting advice, Student budgeting advice article, Student budgeting, student, college budget, college, personal financial advice

Last week on Wallet Watcher, we looked at how to save hundreds of pounds a year by using rail and bus travel wisely. Terrific, you may say. But I am unwilling to pick up the kids from school or do my Tesco shopping on the train. Tell me how to save money on motoring.

Before we even get to insurance, breakdown cover, servicing and the rest, there is a huge amount you can do to save money on fuel, just by adjusting the way you drive.

Think about this statistic. Driving in fifth gear rather than third can cut your fuel consumption by a quarter. There is a right way to do this of course, and it doesn’t involve trying to pull away in fifth.

The National Energy Foundation says that you should change up a gear when you hit 2500rpm in a petrol car and 2000 in a diesel. Cutting your speed from 85mph to 70mph on the motorway will save you a litre of fuel every 20 minutes.

Also consider this, by driving safely within the speed limits, you’ll not only save money on petrol but on the inevitable speeding fines you will rack up. And if that doesn’t sway you, think about the planet. The RAC reckons that simply driving more gently could save Britons £2.2bn and prevent 5m tons of C02 entering the atmosphere each year.

What does driving smoothly mean? It doesn’t mean accelerating between the speed bumps and hitting the brakes as you approach them … a practice I’ve NEVER understood. Accelerate gently, let the weight of the car help you to slow down. In cold weather you don’t need to warm the car up for five minutes before you drive off … modern cars have automatic chokes and should spring straight into action.

Blow up your tires. Think about how hard it is to pedal a bike with poorly inflated tires. Now consider the extra work your engine is having to do to push your half ton of metal around town with under pressure tires. You don’t just burn more fuel, the tires will wear out quicker … more hassle, more expense.

Empty the boot. Your engine is having to work harder to pull the golf clubs and kids bikes that are littering up the storage space. And why are you still carrying the bike rack and storage box on the car when you got back from holiday six weeks ago? Get them off and start saving on fuel.

We don’t get our cars serviced regularly because it’s expensive. False economy. Your poorly tuned engine is burning up excess fuel, and the dirty air filters aren’t helping either. And your car will live longer and hold its value better with regular servicing.

The trick is not to go to the Citroen or VW dealer who sold you the car though … they’ll charge you top dollar for each service. Try to find a reputable independent garage. Recommendations from friends or community websites are the best bet here. Ensure you get your handbook stamped with the service history, as this will help you get the best price when you eventually come to sell.

Bit stuffy in the car? Why not turn on the air con? No! Open the window instead, that’s what it’s for. Air conditioning can increase fuel consumption by up to 10% according to the Institute of Advance Motorists, and it’s not doing the planet much good either.

One thing you can’t legally avoid is car insurance, and one thing you shouldn’t is breakdown cover. The first time you’ve had an expensive tow from a callout garage you’ll wish you’d bought the latter. But you must shop around. Stick with the same insurer year after year and you WON’T be getting the best deal. It’s called customer inertia and retailers grow fat on it. There are great price comparison websites out there for insurance and breakdown cover … USE THEM.

When it’s time to replace the car, NEVER buy new, unless you get an unbeatable deal. Going nearly new is much cheaper, as new cars depreciate sharply as soon as they roll out of the showroom. Check out the cost of leasing rather than buying, and even consider rental cars services if you only use the car occasionally. Their rates start from just £3.95 an hour.

And lastly, get out of the car for a change. I find it hard to imagine living without a car altogether, but I do replace a lot of my journeys with cycling and walking (again, not recommended for the supermarket shop). You’ll save a lot of money on fuel and wear and tear, and you won’t have to pay a fortune for parking (or parking tickets). You could even buy a foldup bike, such as a Brompton, that goes in the back of your car.

Tags: Save money on motoring, Save money on motoring article, motoring, save money, fuel saving, driving, cars