How often do you run out of money before payday? I’ve been there. You probably start the month with good intentions. Perhaps you’re planning to give up takeaways, buy fewer clothes or drink a bit less on nights out. Maybe you’re vowing to put money in a savings account or a Help to Buy ISA at the end of the month. But before you know it, you’ve got a week until payday and you’re wondering if the money left in your account will even stretch to cover your bus pass and a loaf of Warburtons Toastie. You’re still no closer to building up an emergency fund or buying that beautiful two bedroom house in Brighton.
In May last year I moved into a rented apartment with my then-boyfriend. I’d already spent almost two years living with my parents and saving to buy a place of my own, but when his rental contract was almost up, we decided to move in together.
We weren’t in a position to buy a place together, so I decided to put my home ownership dreams on hold and rent instead. Although the relationship didn’t work out and we split up six months later, thankfully I managed to save a respectable £3,000 while living with him.
Since I first started dreaming of buying my own place in September 2014, I’ve saved a huge amount of money towards my first home. To start with I saved £6,000 in six months and I then went on to save £10,000 in a year. Since then I’ve managed to save enough to buy a new build apartment in south Manchester. I should hopefully be getting my keys in a matter of weeks!
When I first started saving, I assumed the best place to put my deposit was a cash ISA. Everywhere I turned for financial advice, the general consensus seemed to be that cash ISAs were the way to go because they offered tax-free interest.* In hindsight, I should have been putting my money in accounts that offered more generous rates in the first place. After all, it doesn’t matter if your interest is tax-free if you’re barely getting any anyway.
Earlier this year Paulette Perhach wrote a viral article called A Story of a Fuck Off Fund. Her article told of a woman who managed to escape an abusive relationship and a sexually harassing boss thanks to a secret stash of cash aka her Fuck Off Fund.
It needs to be said that in some abusive relationships, having money isn’t enough to make the nightmare end. Domestic abuse isn’t an issue that’s exclusive to the poor, and more often than not there are a range of factors that make victims stick with their abusers such as love, fear, and crushed self-esteem.
Although a Fuck Off Fund is far from a magic solution, it’s a fact that many people around the world do find themselves trapped in situations that they can’t escape from due to a lack of money. From abusive relationships to toxic workplaces, money can sometimes be the key to getting the fuck out of dodge.
I often see people arguing that there’s no point in saving for retirement because there’s no guarantee you’ll live that long.
“I could be dead by then!”
“If I die, I can’t take it with me!”
“I may as well live life to the full while I’m young!”
Although I do believe it’s important to live every day like it’s our last, the idea we shouldn’t save for retirement because we could get hit by a bus and die just seems a little silly. In this post I’ll share 3 reasons I think it’s just plain daft.
You know the Help to Buy ISA? That sort-of-savings account that allows you to save £200 a month and rewards you with a 25% government top up towards a deposit on a house? Well…
It turns out that this *amazing* government top up, which they specifically told us could be used on a deposit, can’t actually be used on our house deposits after all. It’s all rather complicated and since I’m no property expert, I’ve had to spend hours trying to get my head around what’s going on.
Let’s start by taking a look at how George Osborne introduced the Help to Buy ISA. From 1:43 he *literally* says the government will top up our deposits by £50 for every £200.
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But, according to The Telegraph, a ‘flaw’ in the Help to Buy ISA scheme means that the 25% government top up won’t be paid to first time buyers until the property sale has completed.
Wait! What exactly is a Help to Buy ISA? The Help to Buy ISA allows first time buyers to save £200 a month and rewards them with a 25% top up from the government. The most a person can save in the ISA is £12,000, meaning someone with this amount saved would receive £3,000 off the government. The money from a Help to Buy ISA can be used to buy a house up to the value of £450,000 in London, and up to £250,000 everywhere else. Until now, the government and banks have led many of us to believe the 25% top up could be used for the deposit.
Considering thousands of first time buyers across the country are relying on this top up in order to gather their full deposit together, a lot of people are understandably frustrated and, if the news is true, some people may have to wait even longer than they anticipated to buy their own home.
For example, a person planning on buying a £150,000 house with a 10% deposit will now have to save more money themselves, as the government won’t be giving them the £3,000 they need until after they’ve put down a deposit – assuming this news is true.
When will I get the 25% government top up?
You will be given the top up once the sale has been completed. The Telegraph and The Independent suggest you’ll be able to use the money towards the cost of your home, by using it for your mortgage repayments.
The government’s Help to Buy ISA website says:
“When you are close to buying your first home, you will need to instruct your solicitor or conveyancer to apply for your government bonus. Once they receive the government bonus, it will be added to the money you are putting towards your first home. The bonus must be included with the funds consolidated at the completion of the property transaction. The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.”
At first glance, this looks as though it’s straight up saying “the bonus cannot be used for the deposit.”
But, some people are arguing that this simply means the bonus won’t be added to the deposit BEFORE you give it to the solicitor. These people suggest the money will be added to the deposit after the exchange of contracts, meaning this whole #HelpToBuyISAGate is a big fuss over nothing. But at the moment, we don’t have any concrete answers.
Why didn’t the bank tell me about this?
If this revelation is true, it seems as though some banks didn’t know/their staff were ill-informed.
Some people have accused the banks of miss-selling the Help to Buy ISA. It will be interesting to see what happens, if this is the case.
This is from The Telegraph:
Sources at high street banks said they were unaware of the restrictions, which state: “The bonus cannot be used for the deposit due at the exchange of contracts, to pay for solicitor’s, estate agent’s fees or any other indirect costs associated with buying a home.”
Banks and building societies have been selling the Isas on the premise that they can be used to boost home deposits. They may now be forced to change their advertising.
Is a Help to Buy ISA worth bothering with?
100% YES. I know that thousands of people are likely to feel lied to today, but even if you don’t get the top up until after you’ve put down your deposit, the Help to Buy ISA is still the best way of saving for a home. Nowhere else will give you a 25% savings boost towards your first home.
And with interest rates falling, traditional savings accounts are likely to be less beneficial than ever in the coming months.
For example, just last week Santander revealed plans to slash the interest rate on its Santander 123 account from 3% to just 1.5%.
Whether you’re already saving in a Help to Buy ISA or you’ve been thinking about getting one, it’s still worth having.
I plan on putting down quite a big deposit. Will this affect me?
If you’re someone who plans to put down a large deposit (one that far exceeds the full £15,000 you can save with a Help to Buy ISA) this news shouldn’t be too detrimental for you. After all, you’ll still have the money required to put down your deposit.
The people this will affect the most are those who are struggling to scrape together a small deposit.
So basically, the Tory Help to Buy ISA helps people wealthy enough to have deposits save few quid off their mortgage https://t.co/o0rUAxee99
— HannahJane Parkinson (@ladyhaja) August 19, 2016
What is Twitter saying about this?
Understandably, Twitter is concerned. After all, the vast majority of those who have opened a Help to Buy ISA have done so under the impression the money would be for a deposit.
So if I was expecting to get full 3k for a deposit from help to buy ISA – the limits of the account mean that’s now extra 15 months saving.
— lazy stargazer (@ditsycola) August 20, 2016
Ha, not only have I got a £43k and growing student loan bill, I’ve now been told the Help to Buy ISA I’ve been saving is bollocks.
— Vicky Chandler (@VickyChandler) August 20, 2016
So Help to Buy ISAs don’t actually help you to buy a house (ie. get a deposit) just pay off the mortgage. Ta George. https://t.co/4US0ImQQso
— Charlotte Morris (@Charlotte_E_M) August 20, 2016
This is outrageous. I have a ‘help to buy’ isa and its the only feasible way I can get myself on the property ladder https://t.co/xUX2PNPKF4
— Gaz Drinkwater (@Radio_Gaz) August 20, 2016
Osborne’s Help to Buy ISA promise turns out to be such a huge lie he’s agreed to write it on the side of a bus. https://t.co/Rpc7Klw95m
— David Schneider (@davidschneider) August 20, 2016
What are the experts saying?
Although journalists and tweeters are going mental over this, some money and property experts remain rather calm.
Martin Lewis tweeted:
The H2B ISA has always been for mortgage dep not home deposit (I covered in my show & MSE). Slightly surprised its a now news!
— Martin Lewis (@MartinSLewis) August 19, 2016
Paul Lewis (of no relation to Martin) says:
Help to buy ISA can’t be used towards deposit https://t.co/1e8Jd8AXtr Rules have always been clear. Scandal is the banks misselling them!
— Paul Lewis (@paullewismoney) August 20, 2016
Santander has announced that on 1st November it will be halving the interest rate on its Santander 123 current account to just 1.5% rather than 3%.
When I heard the news this morning I almost shed a tear. Okay, not really, but still. I only opened a Santander 123 account a few months ago. Since then I’ve been consistently making a decent amount of interest every single month. I’m making more interest in a month than I used to earn in a year when I saved all my money in a pitiful cash ISA!
According to a 2014 survey, a quarter of Brits have no money set aside for a rainy day and 60% have less than £1,000 saved. Considering how expensive it is just to live (and by this I mean put a roof over your head, eat beans on toast, and pay your Netflix subscription because it’s cheaper than leaving the house and having a social life) is it any wonder so many people are finding it difficult to save?
As you’ll probably know by now, I’m a liiiiittle bit money obsessed. I love finding ways to make extra cash and watching my money grow. As a result, I probably check my bank balance far too often in the hope my finances will have magically improved since the last time I looked. Well, I was in for a pleasant surprise earlier today because I checked my bank to discover I’ve earned more than £25 in interest on my Santander 123 current account this month.