Being better with money can bring big rewards

Being better with money can bring big rewards

If people were better at managing their money the UK could be better off by a whopping £108 billion, a new report from the Money Advice Service reveals today.

This is a huge number. It's so big it's difficult to get your head around. But it would certainly mean we'd all have a lot more money at our disposal.

Over the next 30 years, improving how people deal with money could add £20 billion to our collective savings, boost our pensions by £10 billion and add another £50 billion to our investments.

Debt would be less of a factor too, with the number of those over-indebted falling by 13%, bringing with it improved health and quality of life. As a result of larger bank balances, spending would go up by close to £30 billion, helping the economy.

So how do we get there? Well, that's the focus of Financial Capability Week.

For people to better manage their finances, they need to improve their skills and confidence with money, making them what's called "financially capable".

What makes someone "financially capable"?

There are some basic behaviours displayed by people with higher financial capability.

These include:

  • Shopping around for deals to make money go further
  • Understanding compound interest
  • Saving regularly
  • Reducing impulse spending

Though you might feel confident with some of these, you might not feel able to say you could do them all.

It's easy to overlook how a lack of financial education can affect our day-to-day dealings with money.

Money Advice Service research has shown one in five aren't able to read a bank statement, while three in 10 people never openly discuss their finances with anyone.

As a result, there are around eight million people experiencing problems with debt, and four in 10 adults have less than £500 available to cover an unexpected bill.

How to improve your money knowledge, confidence and motivation

Though there's a big part to play by the financial and education institutions, such as banks and schools, there are three activities you can try yourself.

Boost your money knowledge

If there's a topic you don't understand – like compound interest – you can read simple guides on the Money Advice Service website. Even the most complicated topics should be easy to understand, but just pick a couple of subjects you wish you knew more about and have a read.

Increase your money confidence

A budget can help you keep track of where your money goes and monitor your bank balance – meaning you're able to spend and save with a better understanding of your financial situation. It's actually really simple to pull one together using an online tool like the Money Advice Service Budget planner.

Find your money motivation

When you're saving, setting a goal makes the task much easier. It could be for a holiday, an engagement ring, perhaps even your retirement. But knowing where that money is going is a great way to keep you saving and stop you spending on other less important things.

This article is provided by the Money Advice Service.

Vintage money-saving tips
See Gallery
Vintage money-saving tips
Back then there was no choice, because the mass-produced microwaveable meal was just a glint in a marketing guru's eye, but now, cooking from scratch can save substantial sums.
The older generation learned that there were meat-free days of the week to save money, and that if you had meat you''d stretch mince with breadcrumbs, or buy cheaper joints and use every scrap.
Perfect fruit and vegetables and top-of-the-range brands are a new phenomenon. Buy generic non-branded food and fruit and vegetables in whatever size and shape is most affordable

Nowadays we rush around the supermarket grabbing things we like the look of - with little idea of what we're going to do with it. Making a list and thinking about what you buy can save you thousands of pounds over the course of a year.

There's no such thing as 'left-overs' there's just the ingredients for tomorrow's dinner. The remains of the meat can be stir-fried the next day, the vegetables blended into  soup, and the potatoes saved for bubble and squeak.

Try an experiment and eliminate everything from your life with the word disposable in the title. Not only will you save money, but your bin will take far longer to fill too.

Before you bin anything, think twice about whether you can give it a second life. Think carefully, does your granny have her tried and tested tips that she has a habit of mentioning, for instance, washing out freezer bags? If you mock, you're missing a trick and wasting money and resources.
Cutting out draughts and insulating your home properly can cut 10% off your heating bill.
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
If you save your washing and dish washing until you have a full load every time you'll save energy and save money.
Over the generations we have been sucked into believing the hype. In the days when adverts were few-and-far between, we managed without many of the things we consider essential nowadays. Re-consider what you buy, and why. Without advertising, would you buy any of it?
It's always cheaper to save in advance and plan a purchase than to rush in and borrow - which could end up costing you hundreds of pounds more in interest.
Older generations typically withdraw what they can afford to spend in cash and then leave their debit card at home or deep in their wallets. This has the advantage that they don't tend to reach for a debit or credit card and spend more than they can afford.
Because the older generations couldn't borrow their way out of trouble, they tended to plan more. Give your family a financial safety and a nest egg for the future.
Back when there were only a finite number of items of clothing to go around in a neighbourhood, people borrowed from each other for special occasions. Nowadays swapping and sharing can save substantial sums
Back in the 1940s when no-one had central heating, people got used to wearing another layer at home. Try lowering your thermostat gradually, and only stop when those around you start to notice - you'll be surprised how much you can save.
There was a time not so long ago when no-one could actually remember anyone who had actually bought a bike. They were passed through the siblings, then across family and friends networks, so that decades later, children were still learning to ride a bike for free. Of course it helps if you buy something gender-neutral, then you can hand it down, and reap the benefits as others hand expensive toys on to you.
In previous generations, neighbours would think nothing of asking each other to babysit, walk their dog, or to borrow a ladder. Nowadays we pay handsomely for babysitters and dog walkers, and each have an expensive ladder gathering dust in the shed.
The army of people who come to our homes to do odd jobs is a new phenomenon for all but the very wealthy. You may well have the skills required to complete these jobs, so get stuck in.

Ditch going out for dinner or browsing round the shops for taking a walk, visiting the beach with a picnic, or holding a family DVD night.

Nowadays we're constantly striving for a bigger TV, a flashier car and a better kitchen. Generations ago people never considered that they would ever be able to afford bigger, flashier and better, so they got on with the business of enjoying what they had.

Read Full Story