8th December 2014
Christmas is a time of good cheer and festivities, but for some the sheer cost of this time of year can be a stark reminder of the need to keep a handle on your finances.
Maike Currie, associate investment director at Fidelity Personal Investing offers five financial planning tips to help you and your family save this festive season and prepare for the year ahead…
1. Create a ‘Christmas fund’: We all know Christmas is an expensive time, and creating a ‘Christmas fund’ will help you to cover the increased costs of gifts, food, heating and electricity 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 Junior ISA (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 JISA can be the answer for shop-weary adults. Unlike the latest fashion or fad, investing into a JISA is a gift with long term benefits. The money is locked away until the child reaches age 18, and even a small amount could build up to a significant figure over time, thanks to the effects of compounding.
3. Give to charity: With the season of goodwill upon us, now is an opportune time to give to those less fortunate. Think about 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 – the Chancellor announced in the Autumn Statement that from 6 April next year, the amount you can earn before paying tax will rise to £10,600, 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, from April you can now 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: Before you splurge your hard earned cash, remember that the festive season shouldn’t mean falling into a spiral of over indulgence and over spending. Debt for many can be a struggle, especially over Christmas. 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.