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Millennials are generally classed as those born between the early 1980’s to the mid 1990’s.

Stereotyping any generation is misguided, and while all generations face their fair share of negative press, millennials seem to bear the brunt of the media’s negative headlines, especially around money matters.

They have been accused of wasting their money and spending too much on coffee and avocados[1], while simultaneously getting heat for not spending enough, and killing the napkin, cereal and golf industries to name a few![2] However, the topic of millennials investment habits is not talked about often.

Why should millennials be investing?

Almost half (47%) of those aged 18-24 prefer to put their money into a current account,with only 5% of this age group opting to invest.[3]

With interest rates at record lows for the past few years, current and savings accounts may not be the best option for millennials wanting to grow their cash over the medium to long term.

Investing is a great way to prepare for retirement as products like our Self-Invested Personal Pension offer tax relief (which you can find out more about here) as well as tax protection benefits. Many millennials are wanting to retire sooner, creating movements such as FIRE (financial independence retire early) which originated in the US. Millennials are also being expected to live longer than boomers or gen x-ers, so millennials should be investing at a younger age than previous generations.  ‍

When should millennials invest?

As with all investment the sooner you can invest the better. This is because your investments can generate interest and returns, reinvesting that means you start to make interest on your interest, this is called ‘compound interest’ and can make a huge difference to your investment pot over the long term.  

Where are millennials investing?

Millennials are conscious about where their invested money is going and what it will be supporting. Ethical investing is more popular among millennials than any other generation. If you want to find out more about ethical investments and OpenMoney’s stance on it, you can read this blog here.

For those investing in their property, Help to Buy ISAs are a government initiative investment product, available to first time buyers who are saving to get onto the property ladder. The Help to Buy Scheme has supported over 230,000 property completions since December 2015 and of those using the Help To Buy ISA, 29.9%were aged 19-24 while 69.4% were aged 25-34.[4]

How is millennial investing different?

Millennials grew up in a time where family members may have suffered as a result of the famous market crash in 2008. This means that millennials can be more cautious with their money, it is also clear that education about investment is lacking.

In a piece of research conducted by Barclays[3], 40% of those surveyed claimed that not knowing enough about investing is one of the biggest barriers to investing. This is something we at OpenMoney are addressing, we want to close the advice gap and make financial advice accessible to all.  

1. twentytwowords.com
2. independent.co.uk
3. barclays.co.uk
4. HM Treasury

If you’ve ever considered saving your money for the future - whether that be for a house, wedding or a car - you’ve probably heard the term ‘ISA’. ISA stands for ‘Individual Savings Account’ and is exactly what it says on the tin – a financial product designed to help individuals save.

Before opening an ISA, it’s important to understand what they are and how they can affect your financial situation. Continue reading our blog to find out the answers to questions like; how many ISAs you can have, what are the benefits of an ISA are, and what types of ISA there are.

 How do ISAs work?

 ISAs are like savings accounts but come with additional benefits like tax allowances and bonuses, depending on the type of ISA you open. For example, Lifetime ISAs (LISAs) give individuals a 25% bonus on contributions made up to the value of £1,000, but they can only be used towards a first house or retirement.

The main benefit of an ISA product is the annual tax allowance you receive when saving. Any interest or gains made in an ISA is not subject to taxation, meaning you get to keep any money you make as long as you stay within your allowance.

 ISA Allowances

 Each individual has an ISA allowance of £20,000 in the 2019/20 tax year. This means between your ISAs, you can’t deposit more than £20,000 in a tax year. However, you are able to split your allowance between different types of ISA. This means you could deposit half in a Cash ISA and half in a Stocks & Shares ISA, but you couldn’t split the money between two Stocks & Shares ISAs.

For a Junior ISA (JISA), the allowance is lower at £4,368. This does not affect your personal ISA allowance of £20,000 as the product is held against a child’s name.

 How many ISAs can you have?

You can open and contribute to more than one type of ISA in each tax year, but you’re not able to contribute to another ISA of the same type (confusing, we know). So, if you contributed to a cash ISA in 2019/20, you couldn’t contribute to another until 2020/21 tax year, but you could contribute to a stocks & shares ISA in 2019/20.

JISAs are held against a child’s name which means you can also contribute to that without affecting your allowance, but that money is only accessible by the child once they reach 18.

What are the different types of ISA?

Cash ISA

Cash ISAs are often offered by bank and building societies. They are similar to normal savings accounts and offer a fixed rate of return on your contributions.

Cash ISAs can be good for short-term savings as they come at no risk. However, be careful of which type of Cash ISA you choose as some may have charges for withdrawing. For Instant Access ISAs, there should be no penalty, however for Fixed Rate ISAs you may face some penalty if you withdraw before the set period.

Stocks & Shares ISA

With a Stocks & Shares ISA your money is invested in company shares, investment funds and sometimes cash. They are riskier than Cash ISAs as you could get back less than you invested, but they do have the potential to have higher returns.

Stocks & Shares ISA are more suited to long term goals as you’re able to balance out the ups and downs of the stock market over time.

If you invest with OpenMoney, you’d be investing in a Stocks & Shares ISA. Find out more here.

Lifetime ISA (LISA)

Lifetime ISAs were introduced in April 2017 so are relatively new in the world of ISAs. Lifetime ISAs are a little different to cash and stocks ISAs as they’re designed to help first time home buyers and those wishing to save for retirement.

A LISA can be either a cash or stocks and shares ISA and can be opened by people ages 18 to 40. The limit for a LISA is lower at £4,000 but the government add a 25% bonus to any contributions up to the value of £1,000.

The bonus must be used against your first home or can only be accessed when you’re 60. If you use the money for anything else, you will be charged and are likely to get less money back than you put in.

Junior ISA (JISA)

Junior ISAs are designed to let parents invest for a child below the age of 18. The limit is £4,368 per child for the current tax year.

As with a LISA, a JISA can be cash or stocks and shares, with any interest paid tax-free.

JISAs are a great way to save long-term for your children, but parents and adults should be aware that the account belongs to the child and can only be accessed by them at the age of 18.

OpenMoney ISA

It’s important that you understand the impact an ISA will have on your financial situation before you open one.

If you’re interested in opening a Stocks & Shares ISA, you can take the OpenMoney financial questionnaire to find out if you’re currently in a healthy position to invest.To take the quiz, click Get Started.

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You may have heard the media or popular social media influencers discussing terms such as ethical investments, ESG (Environment and Social Governance) portfolios or SRIs (Socially Responsible Investments). They differ very slightly in the areas that they cover, however a running theme throughout them is the premise of using your money to invest in industries that are not damaging to the environment or members of society. Naturally the growing popularity of this type of investment has brought questions to the surface regarding the products that we offer and the impact that these are having on the planet. Ethical portfolios are not currently something that we actively promote or provide for our customers, so let’s take a look at why.

On trend investing

The world of investing is slowly becoming more accessible and therefore possibly less daunting for the masses. Conversations about money are beginning to take place on platforms that were once reserved for aspirational lifestyle content as well as within mainstream press. Breaking down the barriers surrounding the topic of money and how we choose to manage it is a huge step forward, so we are glad that our customers are interested in progressing with their portfolios.

According to the 2018 Ethical Consumer Markets Report, the UK spends roughly 80 billion pounds on ethical goods (green energy, fashion, ethical food choices) every year[1]. This is no surprise given the spotlight that has been shone on our ethical conscience throughout traditional, digital and social media. With this move towards a more sustainable and responsible way of life, we are seeing an increase in customers wishing to invest in a more ethical manner.

Our stance on ethical investment portfolios

Hannah Cole, our Support Team Lead & Financial Adviser is often first on hand to look after queries such as this from our customers.

“We are often asked to look into ways that our customers can make their portfolios more ethical such as avoiding certain industries (American tobacco, Oil and Gas etc), or even how they can withdraw their money altogether to place it into an ethical portfolio...

... At OpenMoney and our investment site, evestor, we operate by offering model investment portfolios comprised of Mutual Index Funds as opposed to Exchange Traded Funds which is where you will mostly find ethical portfolios. The mutual funds that we use, aim to track specific market indexes such as the FTSE All Share and the S&P 500.”

This means that the only way our portfolios will exclude companies deemed to be unethical is if they are removed completely from the indices. As we don’t actively manage our own funds, we don’t pick the individual companies that they are made up of. Instead, we favour a passive investment approach, which you can read more about on our Jargon Buster page.

What are the ethical boundaries?

As well as being a functional decision, it is also worth taking a look at how far other providers go in terms of being ethical and are we really a lesser option because of our seemingly limited products? When looking to invest, it’s common to be averse to harsher industries that could have a negative reputation such as weaponry, alcohol, gambling etc and support a more sustainable, environmentally friendly portfolio.

However, Hannah raises a strong point in that we need to look at where the boundaries lie. “Where do we draw the line? There are respected companies that we know of, who boldly offer ethical investment opportunities despite having faced fines due to various misdemeanors.” Would investors be happy to invest in an ethical fund, but with a provider who has a somewhat tarnished track record?

Moving forwards

Our current opinion on how we operate within the realms of the ethics is not set in stone. We are constantly researching ways in which we can keep up with political and cultural climates at the same time as maintaining our extremely competitive costs and levels of service. However, if we are going to involve ourselves in the world of ethical investments, it needs to be for the right reasons rather than as a reaction to the media. If we cannot offer a justified rate of costs and returns, then we would be doing our valued customers a disservice which is not an option for us. As the market develops over time, ethical investment is of course something we would like to incorporate within our proposition, and our Investment Committee continue to assess the benefits and risks involved for those choosing to invest with us. As these conversations progress, we will keep our customers updated with developments.

[1] UK Ethical Consumer Markets Report

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Saving money can be difficult and is often easier said than done. If you’re on a low income or stuck in a cycle of living paycheck-to-paycheck, saving every month may feel even further out of your reach.

A recent study by the Independent shows that a quarter of UK adults don’t have any savings, with one third blaming too much debt and high monthly outgoings as the issue. One in ten also admitted they spend more than they earn each month.

Whether you need to save money fast for a holiday next month or you are trying to save as much as possible each month for a wedding or house deposit, there are several ways you can cut costs and increase savings.

At OpenMoney, we understand the importance of having enough cash savings put away, so we’ve put together some tips of how you can save money on a low income.

Budget, budget, budget

The first step you should take in trying to figure out how much you can save is figuring out how much you spend. To do this, take a look at your bank statements and try to categorise payments into things like rent, bills, travel, food, subscriptions and anything else that works for you.

Writing all of this down can help you understand where most of your money goes. You may quickly realise that you spend £100 on work lunches every month or that you’re still subscribing to a service you don’t use!

Once you have all this information, split your spending into ‘committed spending’ and ‘disposable income’. Everything you need to pay for, such as bills or essentials, is committed spending and the rest is disposable income.

Now it’s time to start setting a budget for your disposable income. If you have £600 of disposable income a month, try to set yourself a budget of £400 – roughly £100 a week. Stick to your budget and you’ll save £200 a month which is £2,400 a year!

You can go even further and set budgets for each category you created like eating out, weekly food shops and entertainment to make sure you stick to your overall budget.

Switch and save

Another great way to save money quickly is to look at your committed spending to see if you can save by switching your current providers for services like gas, electricity and the internet.

Companies are always battling for your hard-earned cash and there’s probably someone out there who can offer you a cheaper deal than your current one. If your energy bills cost £100 a month and you’re offered a new contract for £80, that’s a saving of £240 a year!

Do this across all of your household bills and it’ll soon start to add up and fast.

Later this year we’ll be partnering with uSwitch to make it really easy for our app users to find out if they could save by switching their energy bills. Keep an eye out for more updates from us on that one.

Round it up

Look after the pennies and the pounds will look after themselves.

Most transactions are now paid with our debit cards, meaning we never see the money pass through our hands. An old-fashioned way of saving used to be putting your spare change in a piggy bank and watching it grow over time.

If you take that principle and apply it to your debit card transactions, the pennies will soon add up. For example, if you spend £2.70 on a coffee, simply deposit 30p into a savings account to round up the transaction.

Many banks offer this as a service that directly deposits your ‘change’ into your savings account. Get in touch with your bank to see if this is something they can offer.

If not, simply add up your transactions on a daily or weekly basis and deposit it in your savings account manually.

Be open to change

One of the most difficult things we face when trying to save is changing your usual habits.

If you’re used to buying a coffee on the way to work every day, starting to take your own coffee may be a difficult change to make.

When making these decisions you need to weigh up why you’re doing it and whether it's worth it to you. 1 month of bringing in your own coffee could save you £90 (if you spend £3 a day). A good quality bag of coffee can cost as little as £5 and you still get to have your morning coffee.

There is a limit to how far you should take this. Don’t stop doing everything you enjoy as you may start to lose the willingness to save. Finding the right balance of sacrifice and saving is key to reaching your goals.

Find out what you’re entitled to

Not everyone is aware of the benefits - such as tax credits - that are available to them from the UK government. This may mean they’re missing out on extra cash.

A full list of UK tax benefits can be found on the Gov.uk website and there’s a handy benefits calculator to help you understand if there are any benefits available to you.

Try to take make use of all of the benefits that you can - they’re there for a reason!

Just like saving on your bills and rounding up your cash, these small wins can make a big difference over the course of a few months.

Remember why

One final tip is to always remember why you’re saving in the first place. It’s often easy to make an impulse purchase that you didn’t need or get your favourite takeaway after a stressful day. If in these moments you remember why you’re saving, you can avoid plenty of unnecessary spending and watch those savings grow!

If you’d like to learn about how to budget better in 2019 and money saving tips for your summer holidays read our other blogs on money management.

There are lots of headlines right now about Brexit, a potential general election and how these could affect house prices, the economy and so on. We can’t predict the future, but when it comes to investment, we can make smart decisions with the knowledge that we do have.

Diversification

Here at OpenMoney there are several ways we prepare our investment portfolios for uncertainty. We make sure our portfolios are diversified, this means we spread our investment funds across different markets, and across different geographies. We do this so that if an event affects one industry or market, your overall fund shouldn’t be impacted too much.

Rebalancing

We also rebalance your portfolio when needed. Over time as investments rise and fall, the original asset allocation can ‘drift’. Because the value of your better performing funds will grow and those lower risk funds may not grow as fast. Rebalancing is the process of buying and selling assets in a portfolio to maintain the original asset allocation.

Try not to panic

You may be thinking about withdrawing your funds in anticipation of a negative market change. You can of course withdraw your funds at any time. But it’s important to remember that the reason investing is for the long term, is to ride out these changes in the market.

The market has always seen periods of uncertainty and market turbulence is unfortunately just a part of the investing lifecycle. We know that the potential for market fluctuations around political events can be unsettling, however the global stock markets have continued to rise overall for much of the past ten years.

It is also important to remember that you only really lose money if you sell during these dips at a lower price than you bought.

We only allow people to invest if they have a cash buffer of at least 3 months’ outgoings saved. Having these savings easily accessible should help to ease any worry of seeing your investments fluctuate in value.

Still have some questions? You can chat to one of our friendly advisors for free via webchat, email or by phone.

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