Euan Spencer, financial adviser for SaSo Strategic Advisers, explains how to tackle savings and investments, even during a cost-of-living crisis
JERSEY is facing a cost-of-living crisis, and worse still, we are ‘far from through the worst’ of it, the head of the Consumer Council has warned. His words come after new data showed Jersey had been hit with a rise in the rate of inflation not seen for more than 33 years.
Inflation is at 10.4%, 2% higher than June’s inflation rate and the largest 12-month jump since September 1990. It is also greater than the UK’s rate of 10.1%.
What does this mean for the average person?
When inflation rises, so does the cost of everyday goods and services such as food, petrol, fuel etc.
Over recent years, the Island’s housing market has also seen a price surge, meaning property prices and rents are rising.
The difficulty many people face today is that life, in general, is more expensive, and while salaries need to increase to reflect this rise, many have not. Most Islanders do not have an alternative source of income to keep pace with their expenses. This means households have to make their money go further and, sadly, more people are falling through the cracks and into personal financial crises.
At SaSo, we recognise the importance of our corporate social responsibility and actively support several local initiatives. One of our most recent endeavours has been with Community Savings.
The charity helps those who are experiencing financial difficulties. It aims to promote financial inclusion in Jersey by providing free and confidential services, guidance and practical assistance.
SaSo is proud to announce that it has agreed to fund a new tech portal allowing Community Savings members to access their bank accounts to review balances, payments and income. Those not able to have a traditional bank account, perhaps due to previous financial difficulty or lack of income, are now, thanks to this portal, able to enjoy the convenience of online banking.
Steve Eldred, Community Savings managing director, said: ‘We are hugely grateful to the SaSo Strategic Advisers team for their support in funding the costs of this online tool. While we remain conscious of those needing our close support with their finances, particularly at this time of economic challenge, some of our customers seek the convenience an online tool provides. This will equip them with real-time information to enhance their budgeting capabilities.’
Meeku Patidar, SaSo Strategic Advisers founder and chief executive, added: ‘We are delighted and proud to be able to support such a worthwhile initiative for those who need it most. SaSo’s service proposition includes providing technology to its clients using a portal, allowing them to self-serve and see the performance of their investment and pension plans. It is great that we can fund a similar initiative for this local charity, and we hope its members find the portal helps them to manage their money more easily.’
My four recommended steps for better financial planning
For those who still have income after all bills are paid (known as disposable income), what to do with these funds is becoming increasingly important.
1. Start with your emergency fund
Your ‘emergency fund’ should be your priority as this is essential for preventing future personal financial crises. We recommend building this amount to three-to-six months’ worth of expenses to ensure you have cash for unexpected bills.
2. Accumulate savings
Once you have built an emergency fund, focus next on building your overall wealth – in the financial planning industry, we call this wealth accumulation.
For funds that you need access to in the next three to five years (ie a deposit for a property purchase), it is worth making regular or ad-hoc contributions into a savings account. Alternatively, if you are confident that you will not need the funds for a set period, you can place them in a fixed deposit account. Interest rates have increased dramatically in the past year, and savings interest rates are becoming more and more attractive as a result.
3. Accumulate – investments
For any funds that you won’t need access to for the longer term (five years plus), investment in those funds should be considered. Potentially keep pace with inflation so that your money can still buy as much in the future as it is today. You should only consider investing if you do not require the funds for the long term and are therefore not concerned with any short-term volatility.
4. Make the most of pension schemes
Does your employer offer a pension scheme? The occupational pension scheme is a tried and tested accumulation vehicle that provides tax relief on your contributions. Jersey employers are not required to offer a pension scheme. If you can afford the regular monthly contributions, we recommend joining a pension scheme to benefit from any additional contributions.
If your employer does not offer a pension scheme or you are self-employed, you may consider setting up a private one. These schemes still benefit from tax relief on contributions. To set such a scheme up, you will need to:
5. Talk to an expert
Deciding where to invest your money is tricky. Whether employer-led or private, a pension scheme may not always be the best solution. If you are saving for your children’s university fees, you would probably want to accumulate these funds in one lump sum before retirement. A financial adviser will guide you to where your funds are best directed.
If you already have a relationship with a local financial adviser, meet once a year to discuss your plan. They will explain your plan’s performance and ensure your contributions align with your retirement goals.
About SaSo Strategic Advisers
SaSo provides strategic financial advice and investment management services to private clients and trustees, predominantly resident in the Channel Islands, through our full wealth management service. Our people have many years of experience providing these services within small and large organisations worldwide. We are passionate about helping and guiding our clients to achieve their long-term financial ambitions.