As a parent or grandparent, you want the young children in your life to grow up to be happy and successful adults. A solid grasp of finances could set them off on the right track when they get older, but alarmingly, many children don’t receive any lessons on the subject during their formal education.

A Nationwide survey found that 84% of parents say their children haven’t received any financial education at school despite 96% believing it’s important for young people to learn about money.

In light of data such as this, it might be prudent to take on some of the responsibility and start educating your children or grandchildren about personal finances yourself.

Making the experience as enjoyable as possible could help to engage kids in money conversations. So, read on for three fun ways to pass on essential finance lessons to children as they grow up.

1. Use games to teach kids about money in an interactive way

According to a report from UNICEF, play is one of the most important ways in which young children gain essential knowledge and skills. So, integrating financial lessons into playtime through games could be an effective way to teach them about money. 

Games let kids role-play everyday financial scenarios and learn money fundamentals without any risk. 

There are several fun games you can play with young children using items you have at home:

• The desert island game – get your children or grandchildren to imagine they’re stranded on a desert island and can only bring six items. Through discussing their options, they’ll soon realise it’s sensible to prioritise essentials over fun items when they have limited choice, giving them an introduction to the basics of budgeting.

• Setting up shop – encourage your child to set up a shop selling household objects. Can they set accurate prices and give correct change? Next, flip the game and let them be the customer. Can they buy everything they need without going over budget?

Alternatively, there’s a plethora of fun financial board games you can buy for kids of all ages:

• Money Bags – in this game for ages five and above, players learn to recognise coins and develop their maths skills by completing chores and earning money as they move around the board.

• Pay Day – suitable for children aged eight and older, Pay Day simulates something most people are familiar with – the monthly payday cycle. Players must ensure their pay packet lasts the month and whoever has the most at the end of day 31 wins.

• The Game of Life – this classic board game takes players through an entire lifetime. It can teach children the financial implications of saving, further education, retiring and more, all in a family-friendly package.

The best money games reward kids for making decisions that would also benefit them in the real world, teaching them valuable lessons in a fun, interactive way. Playing these games is also a lovely chance for quality time together, so it’s a win-win all around.

2. Let them be in charge of money on a day out

As your children or grandchildren grow up, it’s important that they begin to understand the value of money.

While you will no doubt enjoy treating your loved ones, it can be hard for children to grasp how far money goes when adults buy things for them. Finding interesting ways for youngsters to practise spending money helps them understand exactly how much items and activities cost. 

One fun way to do this is to let them be in charge of the family budget on a day out.

For example, say you’re visiting a castle. Before you arrive, give them £100 and explain that this money must pay for everything you do that day.

When you arrive, they’ll have to pay for entry. This might leave them with, say, £50.

After exploring the castle, your child might be tempted to buy something from the gift shop. However, if they buy a toy or book, they might not have enough money to pay for lunch.

They’ll need to carefully consider what’s more important. Hopefully, they’ll realise that food takes priority over souvenirs. If not, they’ll have to face the consequences of their actions and skip lunch.

Perhaps it would be wise to have backup sandwiches in the car to avoid any tantrums on the way home!

3. Books are a fun way to learn for kids of all ages

If your grandchild loves story time, or your bleary-eyed teenager stays up reading until the early hours, you could introduce them to books about money.

You might think personal finance is too dry a topic for children’s literature, but there’s an excellent range of entertaining books on the subject for children of all ages.

The Four Money Bears by Mac Gardner is a wonderful option for younger children. 

Through beautiful illustrations and accessible storytelling, Gardner uses the tale of Spender Bear, Saver Bear, Investor Bear, and Giver Bear to teach kids about the functions of money and instil lessons such as spending cautiously, saving diligently, investing wisely, and giving generously.

For kids aged 8 to 12, Finance 101 for Kids: Money Lessons Children Cannot Afford to Miss by Walter Andal is a fun-to-read crash course on essential topics like earning, saving, investing, and credit. It even touches on more advanced subjects like the stock market, foreign exchanges, and basic economics.

Reality TV-loving teenagers might enjoy Deborah Meaden Talks Money. This insightful book from entrepreneur and TV personality Deborah Meaden features podcast-style interviews with stars including Gary Neville, Sophie Ellis-Bextor, and Joe Lycett. It’s designed to demystify the world of finance and help your children build good money habits in an exciting, relatable way.

Teaching your children and grandchildren about money may seem like a challenge now, but when they reach adulthood, all your patience and effort should pay off. You never know, you may even get a belated thank you! 

Contact us to support your children in other ways

Sharing financial knowledge with children is important, but there are other ways you can support their financial future.

We can help you craft a financial plan that supports your children or grandchildren, laying the foundations for the next generation. Contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tapering of the Personal Allowance means some higher-rate taxpayers effectively pay an Income Tax rate of 60%, sometimes without realising. Fortunately, if you’re affected, there could be ways to reduce your tax bill. 

A report in the Telegraph suggests 1.35 million workers were affected by the 60% tax trap in 2023/24. Collectively, they paid an extra £4.7 billion to the Treasury. Read on to find out if you could unwittingly be paying a higher rate of Income Tax than you expect. 

The tax trap affects those earning more than £100,000

You might think the highest rate of Income Tax is 45%, and officially you’d be correct. Most people pay the standard rates of Income Tax. In 2024/25, Income Tax rates and bands are: 

Please note, that different Income Tax bands and rates apply in Scotland. 

However, the Personal Allowance is reduced by £1 for every £2 you earn over £100,000. If you earn more than £125,140, you don’t have a Personal Allowance and pay tax on all your income. 

For example, if you earn £101,000, on the £1,000 above the threshold, you’d pay £400 of Income Tax at the higher rate. In addition, you’d lose £500 of your Personal Allowance, so this portion of your income would also be subject to Income Tax at 40%, adding up to £200. 

So, out of the £1,000 you’ve earned above the tapered Personal Allowance threshold, you’d only take home £400 – a 60% effective tax rate. It’s led to the tapering being dubbed a “stealth tax” in the media. 

Further compounding the issue is the fact that the Personal Allowance and Income Tax bands are frozen until 2028. 

While the thresholds are frozen, many people are likely to receive wage increases. As a result, more people are expected to be caught in the 60% tax trap in the coming years. 

Don’t forget your salary might not be your only income that’s considered when calculating your Income Tax bill. For example, you could be liable for interest earned on savings that aren’t held in a tax-efficient wrapper. 

Contact us if you’re unsure which of your assets could be liable for Income Tax. 

3 legal ways to avoid falling into the 60% tax trap

If you’re affected by the tapered Personal Allowance, thinking about how you structure your earnings may provide an opportunity to reduce how much you’re giving to the taxman. Here are three excellent options you might want to consider. 

1. Boost your pension contributions 

One of the simplest ways to avoid paying 60% tax if you could be affected is to increase your pension contributions.

Your taxable income is calculated after pension contributions have been deducted. As a result, boosting pension contributions could be used to reduce your adjusted net income so you retain the full Personal Allowance or reduce the proportion you lose.

Increasing pension contributions could help you secure a more comfortable retirement too. However, keep in mind that you cannot usually access your pension savings until you’re 55 (rising to 57 in 2028). 

2. Use a salary sacrifice scheme

If your workplace has a salary sacrifice scheme, it could also provide a useful way to reduce your overall tax liability. 

Salary sacrifice enables you to exchange a part of your salary for non-cash benefits from your employer. This could include higher pension contributions, childcare vouchers, or the ability to lease a car. 

By essentially giving up part of your income, you might be able to bring your taxable income below the threshold for the tapered Personal Allowance. 

You should note that salary sacrifice options vary between employers, so it may be worthwhile to check your employee handbook to see if any options could suit you.  

3. Make charitable donations from your income

If you’d like to reduce your Income Tax bill and support good causes, you could make a charitable donation. Again, by deducting donations from your salary before tax is calculated, you could manage how much of the Personal Allowance you lose. 

Contact us to talk about how to manage your tax bill effectively 

There may be other steps you could take to reduce your overall tax bill. A tailored financial plan will consider your tax liabilities, including from other sources, such as your savings and investments, to highlight potential ways to cut the amount you pay to the taxman.

If you’d like to arrange a meeting, please get in touch.  

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

An offset mortgage could help you pay less interest overall. However, they’re not the right option for every homeowner and there are some risks you might want to consider.

Read on to discover how offset mortgages work and the circumstances where they could be valuable. 

An offset mortgage links your savings to your mortgage

When you take out an offset mortgage, it’s linked to a savings account. The money held in the savings account doesn’t earn interest. Instead, the money you have saved is used to reduce the total balance you pay interest on each month.

As a result, the more you have in the savings account, the less interest you pay.

For example, if you had an offset mortgage for £150,000 and held £50,000 in the linked savings account, you’d only pay interest on £100,000. Over the full mortgage term, it could save you thousands of pounds and may allow you to pay off your mortgage sooner.   

If you have savings, an offset mortgage might seem like an attractive option, but there are some drawbacks you may want to weigh up first, including:

• The interest rate on an offset mortgage is usually higher than a comparable traditional repayment mortgage. You might want to spend some time calculating how much you could save when compared to other options.
• The money held in the savings account won’t earn interest, so it’s important to factor in this potential loss too.
• There are fewer offset mortgage providers to choose from than if you opted for a standard repayment mortgage, and some may have high fees.

Some will find the advantages of an offset mortgage outweigh the disadvantages, and there are some situations where it can be a valuable option, including these four. 

1. You have savings that are earmarked for a future goal

If you have savings that you’ve set aside for a medium- or long-term goal, an offset mortgage could provide a way to reduce the amount of interest you pay without tying the money up in property. 

For example, you might have a lump sum that you plan to use in your retirement. As it’s intended for a goal, you may not want to use the money to reduce the outstanding mortgage, but an offset mortgage could provide you with some flexibility. 

You can usually withdraw money held in a savings account linked to an offset mortgage when you need to. So, it could be a useful way to hold an emergency fund too if your savings are accessible. However, keep in mind that if you withdraw money the savings you make will decline, and it could mean you end up paying more than you would if you took out a traditional repayment mortgage. 

2. You’re self-employed 

Many self-employed workers build up substantial savings over the year to pay their tax bills. Depending on your circumstances, adding this money to a savings account linked to an offset mortgage could be more valuable than the interest it’d earn if it was in a traditional savings account. 

3. A loved one wants to offer support

First-time buyers are relying on the support of loved ones more than ever. Indeed, according to Legal & General, family members gifted around £8.1 billion to aspiring homeowners in 2023 and played an essential role in more than half of the purchases made by under 35s.  

While gifts that act as a deposit are becoming more common, family members might not be in a position to do this but still want to offer support. If they have savings that they don’t intend to use now, an offset mortgage could offer a way for them to improve your financial circumstances, while still having access to the money for future needs.

Some lenders offer a type of offset mortgage for this purpose, sometimes known as a “family mortgage”. With a family mortgage, your loved one could place a lump sum in a savings account which can act as a deposit and would be used if you didn’t keep up with mortgage repayments. It could be a useful option for buyers who are struggling to save a deposit or meet affordability criteria. 

At the end of the term, assuming you’ve met your mortgage repayments, your family member would regain access to their savings, sometimes with interest added. 

4. You could pay tax on interest from savings 

Interest rates rising has been good news for savers. Yet, it also means that more people are expected to pay tax on the interest their savings earn.

A report in the Telegraph suggests more than 1 million more savers were dragged into paying tax on their savings in 2023/24 as a result – adding up to around 2.7 million people.

If the interest you earn on your savings exceeds the Personal Savings Allowance (PSA), it could become liable for tax. In 2024/25, the PSA is:

• £1,000 if you’re a basic-rate taxpayer
• £500 if you’re a higher-rate taxpayer
• £0 if you’re an additional-rate taxpayer. 

As the savings held in an account linked to an offset mortgage don’t earn interest, it could be a way to reduce your overall tax bill while reducing the amount of interest you pay on your mortgage. So, an offset mortgage could be particularly useful if you’re an additional-rate taxpayer or already have savings that could mean you’ll exceed the PSA.  

Contact us to talk about your mortgage needs

If you’d like help securing a mortgage, including an offset mortgage, please contact us. We can offer guidance about which type of mortgage may suit your needs and lenders that are more likely to accept your application. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Every day you’ll take mental shortcuts, known as “heuristics”, to help you solve problems quickly. This can be incredibly useful in some circumstances and help you avoid becoming overwhelmed by decisions. Yet, when you’re making large decisions, including how to handle your finances, it could be harmful. 

Heuristics are necessary. Indeed, according to a report in Harvard Business Review, the average adult makes more than 30,000 decisions every day, from what you’ll eat to what you’ll say.

Gerald Zaltman, a Harvard Business School professor, suggests that 95% of our cognition occurs in the subconscious mind. He adds this is necessary – your brain would short-circuit if it had to weigh up each decision one by one. 

So, mental shortcuts are essential for functioning. However, this “autopilot mode” could lead to bias and decisions that aren’t right for you. Recognising which decisions would benefit from more careful analysis could help you seek out opportunities and identify potential risks you might have overlooked if you took a mental shortcut. 

4 mental shortcuts that may affect your financial decisions 

1. Anchoring effect

Anchoring effect is a cognitive bias where your view and decisions are fixed on a particular piece of information.

For example, if you read in the newspaper that a company is poised to grow and its value is above the current market valuation, you might fixate on this number. You may dismiss new information that suggests the initial figure was incorrect because you’ve anchored your view.

It’s a bias that could lead to you minimising potential risks or failing to adjust your view as circumstances change. 

Anchoring can be difficult to avoid, but taking time to review new information and the reliability of sources could help identify where it may affect your decisions. 

2. Herd mentality 

Herd mentality can affect many areas of your life, not just your financial decisions. 

The instinct that there’s safety in numbers could lead to you following the crowd even if it’s not the right option for you. You may simply believe that a large group of people can’t all be wrong, or that others have carried out research, so you can rely on their decision-making skills.

However, herd mentality overlooks the fact that a decision that may be right for one person isn’t necessarily the right option for another. 

If you hear a group of your friends are investing in a particular fund that they’re excited about, you might be tempted to do the same. Yet, perhaps they’re investing with a very different time frame or are taking more risk than is appropriate for you. 

Assessing financial opportunities with your circumstances in mind could help you avoid following the crowd.

3. Confirmation bias

Confirmation bias refers to the tendency to favour information that supports your beliefs and ignore the data that refutes them. 

Confirmation bias can be a challenge when you’re making financial decisions because it might mean you bypass key pieces of information simply because it doesn’t support your preconceived notions. So, it could mean steps to carry out research aren’t as valuable as you might expect. 

Not letting your views cloud how you view information can be challenging. Yet, taking a step back to weigh up the value of the information objectively could help you make better financial decisions. 

4. Familiarity bias

You might gain some comfort from sticking to what you know. However, familiarity bias could mean you miss out on opportunities and, in some cases, might even mean you’re taking more risk. 

For instance, from an investment perspective, it might mean that your portfolio is heavily invested in one geographical region or sector. While the familiar might feel “safer”, the lack of diversity in your investment could actually mean you’re taking more risk.

Similarly, many people choose to hold their money in a savings account where it could be falling in value in real terms once inflation is considered because they’re scared to invest.

According to a survey from interactive investor, 78% of UK adults don’t invest and a lack of knowledge is one of the key reasons. While investing isn’t right in all circumstances, some people may be neglecting to consider investing simply because saving is more familiar. 

Working with a financial planner could help you step out of your comfort zone to seize opportunities that are right for you. 

Working with a financial planner could help you view your finances from a different perspective  

Looking at your finances from a different perspective could help you identify where heuristics could be affecting your decision-making skills. A tailored financial plan could help you set out a path that’s right for you, based on your goals and circumstances, and may help you reduce the effect of bias.

If you’d like to arrange a meeting to discuss how we could support your goals, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Your relationship with money may play a huge role in how you handle financial decisions and your long-term security. Many factors affect your financial decisions, but you might be surprised by how much your childhood experiences still influence you today. 

The majority of parents recognise how important financial education is. Indeed, according to Nationwide, almost 9 in 10 parents to children aged between 8 and 13 say personal finance education would help their children better understand the value of money. 59% also agreed that personal finances were more important than maths. 

Yet, studies suggest these parents might be considering the positive effects of financial education too late.

Research: Money habits could be set by age 7

A 2013 study from Cambridge University indicated that financial habits are formed by the age of seven. The research suggests that children have often formed core behaviours by the age of seven which they will take into adulthood and could affect financial decisions for the rest of their lives. 

While skills like being able to count money are important for handling day-to-day finances, the study recognised that other factors affected money relationships, such as the ability to regulate emotions and think reflectively. 

Your approach to finances when you’re an adult might be just as much about your mindset as your financial knowledge.

For instance, you might understand the tax benefits of using a Stocks and Share ISA to invest in the future. However, letting emotions rule your decisions could mean you miss out on potential returns if you change your investment strategy during market volatility. 

In fact, a report in FTAdviser previously suggested that emotional decision-making costs investors at least 2% in foregone returns each year. Over your investment time frame, those lost opportunities could add up to a substantial sum.  

The Cambridge University research noted that once habits form, it can be difficult to reverse them later in life. However, it’s not impossible, so read on to find out more. 

4 practical ways to overcome potentially harmful money habits

1. Understand your money habits

If you want to improve your relationship with money, a good place to start might be to take some time to understand your habits.

When you’re making changes to your investment strategy, are you more likely to base your decisions on facts or emotions? If you received an unexpected lump sum, would you splurge or use it to support long-term goals?

Retrospectively examining your financial decisions could help you identify patterns in your behaviour. You might realise that while you’re good at managing your day-to-day budget, emotions are more likely to have an effect when you’re handling long-term investments. 

By understanding potentially harmful money habits, you’re in a better position to recognise when they could have an effect in the future. 

2. Review your finances regularly

Busy lives can make keeping on top of your finances difficult. Yet, carving out time to regularly review your short- and long-term finances could also help you spot where money habits are harming your wealth or ability to reach your goals. 

Seeing the effect money habits may be having on your finances may be useful when you’re trying to change your mindset. For example, if you’re often tempted to dip into your savings to cover non-essential expenses, seeing how it could affect your capacity to retire early, support loved ones, or overcome a financial shock could give you pause next time.  

3. Give yourself time when you’re making financial decisions 

Sometimes poor money decisions stem from not giving yourself enough time to think through your options or the long-term implications. So, next time you’re making a decision that could affect your financial future, don’t decide right away.

Allowing yourself a few days to think it through could mean emotions or other factors that were influencing your decision have subsided. It could help break negative money habits and start to form new ones. 

4. Work with a financial planner 

A financial planner doesn’t just help you navigate areas like tax liability or how to use a pension, we can help you manage your money more effectively too. 

Having a tailored financial plan in place can highlight how you may work towards your larger goals and the effect day-to-day decisions might have. It could help you overcome previously established money habits that could harm your long-term financial security. 

In addition, you have someone to talk to when you’re making large financial decisions. Discussing your options can be a useful way to process information and look at your options from a different perspective. It could lead to you making decisions that have a better long-term outcome. 

Contact us to arrange a meeting to talk about your finances 

If you’d like to discuss how we could help you manage your finances with your circumstances and goals in mind, please contact us. 

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.