How To Avoid the Savings Snakes

Written by Karen Bryan

The Savings Snakes and Ladders from Zopa highlights some slithery financial pitfalls.

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I’ve listed some of these snakes below, along with my tips on how to steer clear of them.

  • Not paying for a structural survey when you by a new home and then having to fork out to rewire the house. We paid for a full survey on our current home which gave us the justification to offer less than the asking price for the property. We saved more money than we spent on the survey.
  • Leaving planning your retirement until you are in your 50s when you’d have to put one-third of your earnings into a pension to end up with a decent boost to you state pension. My personal pension is based on the stock market so the value is variable. Being self-employed, there have only been my own contributions going into the pension pot, it’s much better if your employer is also contributing.  If your employer offers a defined benefit workplace pension, where you are guaranteed a certain pension based on contributions, your pay and number of years in the job, it’s probably a good idea to join and pay in as much as possible.
  • Changing holiday money at the airport where you generally get a poor exchange rate. I mainly use my Halifax Clarity Card abroad, which has no fees for transactions or cash machine withdrawals. You do have to pay interest on cash which you withdraw, but as long as you pay the full balance each month, that equates to around 1% of the amount withdrawn.
  • Signing up for finance at a car dealers without shopping around for the best deal. We usually pay cash for our cars. I set aside so much a month towards a replacement in a savings account. We did once take out a zero percent finance offer which had no fees, so was a good deal. When we bought our current car, the dealer tried to get us to sign up for some finance which offered three years free servicing. We were told we could cancel the agreement after a few months, but I didn’t see how we could still claim the free servicing perk when we were no longer on the finance deal. There was also a fee to apply for the loan and an early redemption fee.
  • Not claiming childcare tax credits. Our twin sons are grown up now. We didn’t need to pay for much childcare when they were young, as we managed to arrange our working hours so that one of us was able to look after our sons the majority of the time.

It appears that people are most motivated to save for holidays. Personally, I don’t think of that as savings, as you are going to spend the cash soon on the holiday. I set aside so much in our monthly budget for travel and leisure.

For me, savings are divided into two categories, short-term and long-term. Short term covers things like replacing the central heating boiler and topping up our spend if my income as a self-employed person is lower than anticipated. Long term is for things like supplementing my state and personal pension in retirement and moving home.. I don’t think the money in my pension pot as savings, as I don’t have access to it until I am 55 and I intend to use it to buy an annuity, i.e. an income for the rest of my life.