5 Financial things I wish I'd known sooner

Money seems daunting, but understanding your finances is one of the most important things you can take time to do. I’m Izzy from MoneyMagpie, and I’m the Money Columnist for Reader’s Digest. Here are 5 financial things I wish I’d known sooner.

An Individual Savings Account (ISA) is like a normal savings account, except you don’t pay UK income or capital gains tax. If you’re saving for the short term, a Cash ISA may be your best bet.

However, if you want to save for a long-term goal, there are other options. If you want to buy your first property or save for retirement, a Lifetime ISA (LISA) is a good option. You can open a LISA between 18 and 39 years old. You can deposit up to £4,000 per tax year into a LISA, and the government will give you 25% of anything you put away, up to £1,000—essentially free money!

With a Stocks and Shares ISA, you can buy shares, funds and other types of investments in a tax-efficient way.

Many debit and credit cards offer a round-up—you may not even realise you’re able to use this function yourself. Essentially, round-ups allow you to save money every time you spend by rounding up the transaction total to the nearest pound. If you spend £3.60 at the shop, for example, your transaction is automatically rounded up to £4.00, with 40p being put straight into your savings.

By saving money automatically, I don’t have to think about it. Pennies are added to my savings without me realising, totting up more quickly than you know. As they say, watch the pennies and the pounds take care of themselves.

I’ve managed to save quite a lot doing this. According to MoneyBox, people make an average of 30 transactions per week, with around 28p being saved per transaction. That’s £8.41 per week from round-ups alone. Over the course of a year? That’s over £437 saved.

The easiest time to save money is when you have money. I wish I’d learnt this sooner, and started putting money away on payday when I was younger. It’s so easy to promise you’ll try to save money, but then keep putting it off until the end of the month, when you’ve no funds available to put away.

I get it totally—payday is the time to treat yourself! You’ve worked hard for that money; you deserve to buy something to reward your graft. But payday is also the best time to save.

One of the best things I ever learnt was that saving is for the short term, and investing is for the long term. Savings are for things you want within the next five years—a new sofa, a holiday, a new car. Investments are for anything over five years—pensions or saving to buy a home.

Investing has many benefits, such as being financially independent and building a nest egg for your future. Traditional savings can lose value if inflation increases. Investing can help to protect your money’s worth, and your money can grow over time.

I wish I’d been introduced to this concept sooner. You can even invest for your children to gift them a nice sum when they're older.

Money can seem overwhelming, stressful and dull. However, it’s important to have a basic understanding of financial matters.

We don’t get taught about money in school. At 16, I didn’t have a clue about mortgages or how to budget and manage my money. I wasn’t taught about debt, interest rates or credit. However, it’s super important to understand the foundations.

You don’t need to become an expert. But trust me, having a clear understanding is the key to success. Understand your incomes, outgoings, debts, savings, investments, mortgages, direct debits and credit score. Take a few minutes every few weeks to check where you are financially.

I wish I’d done this sooner and not buried my head in the sand. It could’ve saved me a lot of stress and worry!

Written by Isobel Lawrance, money content writer at MoneyMagpie 

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