7th December 2015
Christmas is the season to be jolly but for some but the sheer cost can be a stark reminder of the need to keep a handle on your finances.
Maike Currie, associate investment director for personal investing at Fidelity International offers five financial planning tips to help you and your family save this Christmas and prepare for the year ahead…
1. Create a ‘Christmas fund’: Christmas can be an expensive time, but creating a ‘Christmas fund’ can help you to cover the increased costs of gifts, food, and utility bills without having to dip into your savings. This fund should fit around your monthly budget. By putting some money aside each month you can make sure Christmas time doesn’t leave a dent in your finances.
2. Add a JISA to your child’s stocking: As armies of grandparents, godparents, aunts and uncles start hunting for the perfect Christmas gifts for little ones, contributing to a child’s Junior ISA (JISA) can be the answer for shop-weary adults. Unlike the latest fashion or fad, investing into a JISA isn’t just for Christmas – rather, this is a gift with long-term benefits. The money is locked away until the child reaches the age of 18, and even a small amount could build up to a significant figure over time, thanks to the magic of compounding.
3. Give to charity: With Christmas being the season of goodwill, what better time to give to those less fortunate by making a donation to a charity this Christmas. There are a number of tax benefits to be enjoyed when you donate to a good cause. To claim some tax back it is important that the organisation you are giving to is recognised as a charity for tax purposes by HM Revenue and Customs (HMRC). You can check this by asking the charity to confirm its HMRC charity reference number.
4. Be tax smart: Make your money work harder by being tax savvy. Make maximum use of your personal tax allowance – from 6 April 2016 the amount you can earn before paying tax will be £10,800, meaning more of your wages will be out of the reach of the tax man. Also remember to make use of tax efficient vehicles such as ISAs and pensions. This year you can save £15,240 a year tax free in an ISA.
If you have maximised your own pension contributions, consider putting money into someone else’s personal pension like your spouse, civil partner, child or grandchild. They will get tax relief added at the basic rate, but this won’t affect your own tax bill. Remember that children have their own allowances and tax bands and it may be possible for a parent to achieve tax savings by transferring income-producing assets to their child.
5. Steer clear of debt: It can be all too easy to overindulge over the Christmas break and this applies equally to your bank balance as much as it does to Christmas lunch. Before you splurge your hard earned cash, remember that the festive season shouldn’t mean falling into a spiral of over spending and debt. One in three Britons will take on debt to pay for Christmas. Don’t become a statistic – make sure you look after the pennies by drawing up a budget and avoiding high interest credit cards.