Christmas is a time for generosity. With that in mind, today I’m going to share with you four of my top wealth-boosting tips. In my view, all of these tips could help grow your savings in 2020.
Ditch the Cash ISA for long-term savings
A lot of people save their money into Cash ISAs thinking they’re doing the right thing because ISAs are tax-free. The problem with Cash ISAs though is that the interest rates on offer at present are abysmal. Currently, the top rate is around 1.35%, which is less than UK inflation.
If your long-term savings are earning that kind of interest, you’re just not going to get ahead because inflation is going to erode the spending power of your money over time. In my opinion, you’re much better off saving into a Stocks & Shares ISA, where you can get your money working hard for you (see tip number four).
The Lifetime ISA could get you £1,000 for free
If you’re aged between 18 and 40, I’d also recommend checking out the Lifetime ISA.
When you make a contribution into this ISA, the government will give you a 25% top-up for free (on contributions of up to £4,000 per year up to age 50). This means that if you put in the full £4,000, the government will gift you £1,000!
This is an incredible deal that’s definitely worth taking advantage of. Just be aware that you can’t access money in a Lifetime ISA (without harsh penalties) until you turn 60 or buy your first property.
Free money for retirement
Did you know that if you make a contribution into a pension account such as a Self-Invested Personal Pension (SIPP), the government will add in some extra money for you too as a reward for saving for retirement? This is called ‘tax relief.’
If you’re a basic-rate taxpayer, you’re entitled to 20% tax relief on contributions (higher-rate taxpayers get an even better deal). What this means is that if you put £80 into a pension account, the government will top up your contribution to £100. Put in £800 and it’s topped up to £1,000!
This really is a generous offer from the government. If you’re saving for retirement, you’d be mad not to take advantage of it.
Use stocks to boost your wealth
Finally, my top wealth-boosting tip is: use the stock market to grow your long-term savings.
A lot of people are afraid of the stock market. They see investing in stocks as a form of gambling. But here’s the thing – over the long run, the stock market tends to rise. This means that if you’re patient, there’s a good chance you’ll make money.
Had you been invested in stocks this year, you’d be pretty happy right now. As I write this, the FTSE 100 index is up around 17% for the year. Plenty of individual stocks and funds have done way better. For example, shares in JD Sports Fashion are up around 130% year to date, while Boohoo shares have climbed around 80%.
If one of your goals in 2020 is to boost your wealth, I think stocks should be part of your strategy.