How much do students rely on payday loans and how they can get out of a debt spiral?

Thousands of students could be directed to payday lenders by a growing pack of online brokers based overseas, as a new report warns that undergraduates are becoming resigned to debt.

BY IONA BAIn

The National Union of Students has stepped up its campaign to prevent payday lenders from advertising on campuses across Britain after its own research found a “worrying” number of undergraduates are applying for short-term loans, which typically charge at least 1,000 per cent in APR interest.

The research with accommodation group Unite published earlier this month found: “Rather than a two-way split between those who see debt as a problem versus those who do not, a third approach is apparent in which some students are merely resigned to the inevitability of debt.”

NUS Scotland has a campaign to encourage students to make their universities “shark-free zones”, claiming that some payday lenders are “targeting students specifically”.

Dundee and Heriot-Watt are among universities which have taken steps to limit payday lenders’ access to students.

However, debt charities warn that students are unavoidably at risk online, where typing “student loans” into a search engine produces multiple results for websites that claim to offer “quick approval” for loans, even if the applicant is unemployed.

Many of these sites are actually payday loan brokers, which use search engine optimisation to appear in results for common inquiries. The websites, often based abroad, then pass on customer details to actual payday lenders, receiving referral fees of at least pound(s)50 in the process.

Clues include descriptions in poor English and offers which seem too good to be true, including no credit checks or application fees.

David Rodger, chief executive of the Debt Foundation, said: “While this is a rampant online problem, it is effectively hidden from most people because you have to do the initial search for a payday loan, unlike the more upfront marketing efforts of mainstream online and high street payday lenders.

Borrowers find themselves passed on to different companies and end up not even understanding who they are borrowing from, let alone what the terms are or how much it’s going to cost them if they are late with their repayments.”

He added: “Because these are simply marketing sites, they pop up and quickly disappear, making them difficult to track, let alone regulate, and leaving huge amounts of distress in their wake.”

An “alternative” payday lender for students, Smart Pig, started by a group of undergraduates concerned at how they were being treated by the sector, says its “pricing, loan terms, tangible ethical safeguards and internal procedures mean our company works very differently from typical payday loan companies”.

It cites a 10-day penalty-free grace period if payments are delayed and a safety net whereby students never pay more than half of what they borrow in interest, as well as a ban on controversial “rollovers”.

Although a small minority — 2 per cent — of students have admitted receiving payday loans or “doorstep cash” in the past year, this could represent up to 46,000 undergraduates if the findings were replicated nationwide.

Previous research carried out by the NUS also found that 10 per cent of college students aged 19 and over had taken out “high risk credit”, with vulnerable students particularly drawn to payday loans.

There are plenty of free and independent sources of debt advice, like Glasgow-based Debt Support Trust, that anyone in payday loan trouble should consult before going any further.

Earlier this month the Competition and Markets Authority published its own probe into the sector.

It recommended that so-called lead generators explicitly disclose their business model, and said it was drawing up plans for a price comparison site for payday lenders.

ORIGINALLY PUBLISHED IN THE HERALD, COPYRIGHT OF IONA BAIN ©

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Filed under Payday loans, Personal Finance, Student Finance

The campaign for credit unions is gathering pace…

Iona Bain

I’m not one for flashy infographics but one of the biggest forces for good in our society has to be the good old credit union, so happy to share this factsheet in order to fight the good fight. Many thanks to Credit Unions Wales for sending this to me and please do get in touch if you’ve had a positive experience of working with a credit union. ionabain[at]hotmail.com.

Finally, please read a recent industry report I wrote about the Credit Unions campaign that’s gathering pace in Wales.

Ib x

Credit Unions Infographic FINAL

A former financial adviser has joined a fast-growing campaign to raise the profile of credit unions in Wales.

Alistair Wilkinson, manager of the Gwynedd and Anglesey branches of the North Wales Credit Union, said the movement was now harnessing innovative products and “methods of distribution”.

He said this was notably by increasing NWCU’s online presence, to overcome restrictions laid down in the Credit Unions Act of 1979 and a lack of awareness among the population.

Mr Wilkinson, who left financial advice eight years ago, has been at NWCU for four years.

He said although credit unions had a long way to go, the sector’s biggest credit unions were starting to benefit from “significant” investment from the department for work and pensions, providing access to enhanced IT and a more efficient, centralised system.

He added: “Credit Unions have a commitment to putting their members first. They have struggled to compete with banks, building societies and other co-operatives due to restrictions in the Credit Unions Act, but the sector is starting to develop a far wider range of products and services, and it is a very exciting time to be involved.”

Background

Hector Sants, the former chief executive of the disbanded FSA, is now heading up the taskforce aimed at establishing a network of credit unions in various churches throughout England. The taskforce was commissioned by Justin Welby, the Archbishop of Canterbury, as a means of challenging payday lenders such as Wonga.

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Why grandparents can be a financial lifeline for the younger generation…

By Iona Bain

When I started my blog three years ago, nobody was really talking about how the downturn would affect young people. I remember reading the occasional newspaper column that highlighted the toxic economic environment ahead of us. I remember hearing my friends whisper about insecure jobs, meagre wages, the crippling rent they had to pay.

I even heard about cases where children were flying back to the nest, just when they should have been finding their way in the world, with their parents quietly topping up their savings and income. But by and large, we were ignored by politicians and the media. Even our extended networks of older friends and family did not necessarily grasp how tough things were going to get.

How things change. Now, it seems like I cannot open a newspaper, turn on the radio or TV, even have a meaningful conversation in daily life without the younger generation’s woes cropping up at some point.

But with that increased level of discussion comes a dangerous sense of detachment. We all become hardened to the brutal reality. I wonder whether constantly writing about the subject meant I had become inured to young people’s financial plight, accepting the bleak outlook as though it was a part of 21st century life.

A letter recently published in the Independent shook me out of my lethargy. A concerned reader pointed out how a young person they knew would be worse off if they accepted a job pegged just above the minimum wage than if they went on the dole. This followed a period where said young person was living in a dilapidated flat on a meagre income, desperate to be independent but unable to find a viable job in an area of high unemployment.

This letter would have been totally heartbreaking were it not for one silver lining when the reader confessed that they continue to subsidise him from their pension.

For the reader was a concerned grandparent, well and truly stepping up to the plate. Faced with a perverse scenario that made it more economical to remain unemployed than enter the workplace, this young man was forced to accept extra money from his grandparents when he should have been completely self-sufficient. If he didn’t accept that lifeline, he would only have £9 a week for his expenses outside of bills and housing costs.

The kindness of his grandparents touched me beyond words. But this is often par for the course with the older generation. Research from pension provider Partnership showed that grandparents provided over £2.83bn in financial support last year. Most have given cash directly (64 per cent of those surveyed for the research) but 14 per cent had also given money to their own children to spend on the youngest members of the family.

Grandparents are often prepared to babysit when necessary, spending an average of £380 whilst looking after youngsters each year according to a study by Gocompare.com. (Only 3 per cent actually insist on charging for these services, clearly thinking their generosity is being outrageously exploited by parents desperate to have a night off!)

Nonetheless, this tangible, day-to-day help is only the tip of the iceberg. Grandparents make hefty contributions to investment vehicles on behalf of young beneficiaries that go largely undocumented – and uncelebrated. In 2012 alone, British grandparents saved £2.4bn, putting away an average of £154 each, according to JP Morgan Asset Management. Furthermore, 14 per cent of students’ grandparents are helping to fund university education – not an insignificant sum today.

I do not observe a culture which venerates that much-needed system of familial support. We collectively place far too much emphasis on what policymakers can do for us.

Hopefully this will change over time as we realise just how much we can change the lives of people around us, and that small financial contributions can make a huge difference to youngsters’ future.

Many grandparents have lived through grim economic times but may have attained a great degree of financial security that puts them in an excellent position to help out the younger generation, both practically and emotionally.

Some of our elders might continue to say that, compared to their years of hard toil and low living standards, the youth of today have never had it so good – that is, if you believe the stereotype. Looking at the compassionate and helpful grandparents of today, I think that caricature has had its day.

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Filed under Economy, Investments, Savings Accounts, Student Finance

How young people can avoid a toxic debt trap

In association with Wilson Field

By Iona Bain

We may be finally pulling out of a painful recession, but are we turbocharging the recovery with worrying levels of debt? Forecasts from the Office for Budget Responsibility seem to suggest so, with household debt at its highest level since 2009.

Spending on credit cards and debit cards also passed the £500bn mark for the first time ever in 2014, according to the UK Cards Association.

Ouch – nearly half a trillion spent on plastic a year? The figures don’t indicate how much young people contribute to this credit bonanza but surely generation Y lack the means to spend like there’s no tomorrow?

Hardly!

Research by the debt charity Step Change found a third of adults seeking debt advice were under the age of 25 in 2012. Furthermore, almost half of 18 to 30 year olds in the UK have no savings safety net, statistics from Intelligent Environments have shown.

That means plenty of youngsters living on the edge, with a small crisis liable to tip them over into full-blown debt. So how can YOU avoid this trap? Young Money Blog has some ideas…

DON’T take a credit card out too soon

. Trust me, it isn’t necessary if you learn how to spend within your means. Yes, having one can help build up a decent credit score but all in good time. Too many people accept those tempting offers (like I get in the post) to apply for credit cards, even if they have the potential to fall behind on repayments. Students in particular have no good reason to use one if they can get a decent FREE overdraft on their student account. Which brings me onto tip no.2…

Even if you are lucky enough to have a free overdraft (like me), watch it like a hawk

It can be a useful facility when used responsibly BUT even the UK’s official financial watchdog (the FCA) has warned that overdrafts can be hard to compare on costs, saying it will now investigate this murky area. Veering beyond the limits of your current account allowance or free overdraft can result in hefty charges that vary wildly from bank to bank. Moreover, these charges mount up by the DAY. If you don’t trust yourself, why not steer clear of overdrafts altogether and use a bank that sends you texts when you’re near your current account limit?

Avoid payday loans like the plague.

If you urgently require money in a matter of hours (usually it is the lender’s quick loan approval time that appeals most), that is a sign that you need a more long-term plan to get your finances in order.

If you have fallen into serious debt, always prioritise paying your bills, rent and living costs, not to mention a mortgage if you have one

If that means you can no longer meet short-term loan repayments, you can apply to cancel the Continuous Payment Authority on your bank account. Step Change has very helpful advice on how to do this.

Go budget!

For milder debt cases, it can simply be a question of cutting back, putting together a budget – there are plenty of tools and templates online – and committing to regular repayments, all the while learning where you went wrong the last time (did you overshoot your budget? Were the repayments actually unaffordable? Did a credit facility tempt you to spend unnecessarily?)

Get to know your different interest rates

APR is the most commonly used measure but make sure you compare like with like if you’re looking to borrow.

Don’t follow the minimum repayment rule on credit cards …

…if at all possible, or you may be stuck with that unpaid balance till you’re old and grey!

Keep store cards at arm’s length

The amount you owe could escalate unless you understand when the interest free period ends and are certain you can repay the debt in full and in time.

Save, save, save

Pop any extra money left in your current account before payday in a savings account. Go for an Isa so your interest doesn’t get taxed. If you don’t have enough to save even £10 or £20 a month, revisit your budget, see where you can economise and rein in that spending!

Dip into your savings if you have a crisis,

Think about it – what would you do if you had a broken down washing machine or failed MOT? A rough rule of thumb is to have three months’ worth of income stashed away, so start saving today to make it happen!

In association with Wilson Field – many thanks to them for making this post happen.
Please get in touch if you’re reputable and interested in working with the Young Money Blog – ionabain[at]hotmail.com.

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Food for thought: how to stop waste in Food Bank Britain

 
The Young Money Blog is embarking on a campaign to keep a lid on food costs and wastage. So many young people can play their part in making the most of what they’ve got in the cupboard – so ready, steady, cook!

Food banks, and the increasing need for them in Modern Britain, should serve as a wake-up call for wasteful spenders and cookers everywhere. It’s time to get more people, young and old, thinking far more carefully about how they buy and prepare food as the scale of food bank reliance hits home.

WHY FOOD WASTAGE IS MORALLY WRONG

Kensington and Chelsea; widely considered to be one of the most affluent areas in the whole of Britain. It comes out smelling of roses in all kinds of research looking at house prices, life expectancy and other reliable measures of social progress.

Yet 794 residents in this postcode went to the local food bank, St Lukes Church, in the last financial year. How has this happened?

Statistics showing an increasing reliance on food banks have sparked controversy. Some commentators in the Daily Mail and the Telegraph point out that food banks are a relatively recent development and that as the years go by, charities like the Trussell Trust – the 17 year old charity overseeing a national food bank network – become more adept at getting the message out to those most in need. Iain Duncan Smith, the minister overseeing a comprehensive package of welfare reforms, has most notably accused the charity of making a tenuous link between food poverty and his policies in order to raise its own profile.

There is a grain of truth in the argument that demand for food banks will inevitably rise as more desperate families find out about this last resort, as it was described in a government-commissioned report last year. (Incidentally, that acknowledged that there may have be a correlation between a shrinking welfare budget and rising food bank usage, but this could not be proved.)

There has been a 54 per cent rise in food bank usage reported over the last year by Oxfam, Church Action on Poverty and the Trussell Trust. Does this mean that food bank campaigners overstate the extent of food poverty, which may have always been a fact of life in Britain?

Possibly, but let’s look at some of the present day factors that have fuelled dependency on food banks.

One place to start is a harrowing Dispatches documentary which aired last night on Channel 4. It looked at three different families struggling to afford food in Suffolk, Hull and Fulham – right in the heart of Britain’s wealthiest neighbourhood.

The documentary seeks to dispel various fears about foodbank usage – namely that a great swathe of clients are completely out of work and on benefits, or that income in some households is being spent on non-essential items. It was also clear that food banks are a source of shame for clients, who were talented cooks (even qualified chefs) who wanted to give their children nutritious meals. Some had also sought help from family and friends before turning to the food bank.

The documentary did not touch on contentious accusations that certain food banks have not been wise to those abusing its resources. Indeed, a recent BBC1 documentary about food banks alighted upon one individual who had mislead the authorities about his real needs, and volunteers who spoke to the Daily Mail attested to others who “play the system”, gaining the requisite vouchers from many different sources to maintain continuous access to this lifeline.

However, the documentary highlighted genuinely desperate, hardworking families, often forced into a nightmarish scenario where parents go without food to feed their kids or are forced to make a choice between heating and eating. It makes you wonder what might happen to some of these families if they didn’t have food banks – perhaps there would be a corresponding rise in homeless people (and children) which would make us stop in our tracks.

The programme hinted at the modern factors that could be driving food poverty – intractable labour market issues (particularly up North), illness in the family which forces the breadwinner to give up work or places parental responsibilities elsewhere, changes to disability allowance and zero hours contracts which do not supply an adequate income. Perhaps the overriding problem is that work is simply not available in some areas and many low-skilled or contract-based jobs are not paying enough to help employees keep up with housing, energy and food costs. All these are deep scars on our economic landscape – how to heal them is a matter for another day.

But what can young people do to turn back the tide of Food Bank Britain?

If you’re feeling too pinched to offer up donations to food banks, you can try volunteering for shifts, which involve packaging up goods and giving them to clients. But sadly, the foodbanks I have come across are only during the week, which is tricky for those who haven’t embraced the homeworking/freelance revolution and need to work Mon – Fri.

What about doing your bit to minimise or even eradicate food wastage?

Kerry McCarthy is a Labour MP who is proposing a parliamentary bill to get supermarkets to donate unwanted food to those in need. She has some sobering words – and statistics – to share with us:

The amount of food wasted in the UK is a scandal. Reducing food waste needs to be addressed urgently and as a growing environmental priority. In the EU, up to 50% of edible and healthy food gets wasted and is set to rise by 40% by 2020 if no action is taken. By creating a surplus of – uneaten – food, the global food industry is adding pressure on scarce land and resources, contributing to deforestation, needlessly adding to global greenhouse gas emissions and helping to drive up global food prices. Government policy focuses on enforcing the ‘waste hierarchy’ further down the pyramid, benefiting slightly environmentally better methods of disposal (such as anaerobic digestion and composting) ahead of landfill. But there is no government incentive for diverting surplus food from disposal and to those levels higher up the food waste pyramid – for human consumption, and where unfit for human consumption, livestock feed.

What about Roger Aitken, co-founder of the Oxford Food Bank? This is what he had to say in the Telegraph:

The statistics for waste are staggering – and an affront to common sense and human decency. In Britain, 15 million tons of food is wasted annually. Nearly half is thown away by us in our own homes, but farmers, manufacturers and retailers account for the rest. Collecting store-cupboard groceries and giving them away to families is a decent thing to do. The Trussell Trust will get a stockpile of food to give to poor families. However, when people buy groceries to donate to food banks, they also increase supermarket sales. And while shoppers are encouraged to buy a bit more to help the needy, around the back of every store, every day, good food will be thrown away. If the big grocery chains are sincere about wanting to combat food poverty and serious about reducing food waste, does the Oxford project not offer a compelling solution? The equation really is this simple: food poverty plus food waste can cancel each other out. All that’s needed is to match need with surplus.

Sooooo…

Next time you reach for the takeaway menu, or are poised to throw slightly out-of-date vegetables in the bin, ask yourself one simple question:

WHAT WOULD MY GRANDMA HAVE DONE?

That is the question we will be answering in a second blog post next week. I’ll also be talking about the wonders of the peasant diet, how a blender could be the best kitchen investment you make and why Ready, Steady, Cook – NOT MASTERCHEF – should be dominating the airwaves.

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Filed under Consumer Affairs, Economy, Food, Shopping

Two tips that will save you HUNDREDS on your train tickets

Forget the glitzy adverts, the promise that you can buy ‘cheap’ train tickets…cut through the commotion and check out these tips that could save you hundreds on your train tickets

iONA BAIN

What did we do before the advent of online booking? It makes it SO much easier to book that much-needed getaway, even if it’s just a short jaunt across the country on a train.

The cost of train tickets has become a real financial bugbear, however, with young people bemoaning the cost of travelling to work, going home to see family and friends or taking a staycation, even if they have a 16-25 Young Persons Railcard in tow.

Colleagues and friends of mine have been booking rail tickets left right and centre for the great Bank Holiday getaway. But they’ve been pouring money down the drain by using a seemingly quick and easy service, offered by a well-known company that advertises itself profusely.

Why is it such a racket? Well, it charges booking fees and doesn’t even give you the full run-down of available train journeys! How bad is that?

I also met someone on Wednesday who had to pay for a whole new ticket when this particular booking company failed to provide a booking number, necessary to access your tickets at the station.

Meanwhile, the East Coast booking service, available online, is cheaper and has a more comprehensive choice of train journeys (not just on East Coast, I hasten to add).

FURTHERMORE, you can collect loyalty points as you book journeys, which very quickly add up…you may well be entitled to big savings or even free trips, as I have been, should you use the service frequently enough.

However, neither the booking service nor the loyalty scheme is well advertised, so my peers have been missing out on bargains…even in first class! Yep, if you book far enough in advance (six weeks is ideal), you can find first class tickets that are even cheaper than standard fares.

So, take it from me, it pays to look around for a better booking service.

But don’t forget that if you’re fast approaching your 25th birthday, take the time out to visit your local train station and RENEW YOUR RAILCARD FOR ANOTHER YEAR!

Even if it means getting a new card before your old one expires, the savings will be well worth it. You’ll have a whole extra year to get the most out of this fantastic little card.

This is exactly what I did when I celebrated my 26th birthday recently…so we may be getting older but hopefully, we’re also getting a bit wiser!

Please find my previous post about train tickets for more info about how YOU can save a bundle.

http://youngmoneyblog.co.uk/how-to-get-cheap-train-tickets-this-summer/

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Filed under Bargain hunting, Consumer Affairs, Tickets, Train travel

And now for some good news!

This weekend, we had a rare slice of positive financial news amid the incessant doom and gloom. Find out why car insurance costs are AT LAST coming down…

Iona Bain

Hooray!

Car insurance costs are actually falling (by an average of £100) as insurers become far smarter at detecting fraud, which can bump up our premiums and keep young drivers, sadly notorious for causing accidents, off our roads.

What a depressing scenario that can halt the financial progress, mobility and independence of any young go-getter. Thankfully, a new innovation that I have road-tested in the past – the little black box – has become a tried and tested way of keeping tabs on risky driving and proving to insurers that we can be trusted behind the wheel.

If you’d like to know more, please have a look my previous blogs, going back a few years now, where I scotch all the scepticism surrounding this so-called ‘spy in the car’ and discuss various ways that YOU could save money on your car insurance.

Check them out!

http://youngmoneyblog.co.uk/why-telematics-insurance-works/

http://youngmoneyblog.co.uk/spying-on-my-driving-if-it-keeps-my-premiums-down-hell-yea/

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Filed under Bargain hunting, Insurance, Technology

Don’t let your dream trip turn into a financial nightmare

The Easter and May bank holiday weekends could see thousands of Scots booking last-minute holidays, if they haven’t already planned a trip abroad or “staycation”. But those of us planning a break from the day-to-day grind can easily forget to prepare for the worst. What if disaster strikes and we can no longer go? What about the unfortunate souls who have an accident or fall ill when abroad? And we’ve all heard horror stories about lost baggage, stolen wallets and cancelled flights…

FIRST APPEARED IN

Herald Scotland

IONA BAIN

The Financial Ombudsman Service reported this week that complaints about travel insurance rose by 13% last year. It currently receives 45 complaints a week, and in more than half of cases the insurer was at fault. Problems included delays, cancellations, curtailed holidays, stray luggage, medical claims and expenses, and personal possessions.

The FOS said: “The cheapest policy isn’t always the best, and any savings you make when taking out a policy may cost you when you come to make a claim.”

It added: “Think about when you want the cover to start, most policies will only cover you for the days that you take the policy out for, which could mean if you have to cancel the holiday before the policy begins you won’t be covered.”

Gocompare.com recently revealed that about one-third of travel insurance claims made by UK holiday-makers in 2012 related to cancellations and were typically worth £700.

The reasons most likely to be accepted by your insurer are illness, an accident, or being called up for jury duty – all of which can be proved in the event of a claim.

But those who opt for the cheapest cover available could find the benefits diminished by a large excess. Moneysupermarket.com says apparently bargain travel insurance from OUL Direct, for example, enables a family of four to cover themselves for a fortnight’s holiday in Europe for just £10.69, providing cancellation cover worth £750.

However, policy-holders would have to pay the first £250 worth of any claim. That leaves only a maximum of £500, which may well not cover the whole cost of your holiday. Paying a little bit more with CoverForYou (£23.25) under the same circumstances would give you £3,000 worth of cancellation cover with a much lower excess fee of £100.

CoverForYou also offers £15m of medical expenses cover and £1,500 of baggage cover, compared to £10m and £500 respectively with the cheaper policy. Medical expenses cover is particularly vital, given that many countries expect you to pay for at least some of your treatment should you be admitted to hospital.

A valid European Health Insurance Card could help you to access free medical care in some countries within the European Economic Area, but this is no replacement for decent medical cover on travel insurance. Sadly, more than half of UK consumers believe that an EHIC entitles them to free emergency medical care anywhere in Europe, according to Gocompare. Even worse, travellers are being conned into buying this card from apparently respectable websites, at up to £24.99 a pop, though it can be obtained from the NHS free of charge.

Those intrepid travellers who plan their own holidays should also look for ‘end supplier cover’ within their insurance in case travel companies, hotels or airlines go into administration beforehand. The failure of Scottish airline Flyglobespan in 2009, alongside many others, is a reminder of how important this cover can be. Insurers who currently provide this extra cover include Swiftcover, Columbus, MRL Travel Insurance and OUL Direct.

If you’re giving overcrowded airports a miss and going on a road trip instead, don’t forget about breakdown cover. The cheapest UK cover listed by Moneysupermarket is on offer from The Green Insurance Company at under £30.

Rail travellers, meanwhile, should avoid putting luggage on a rack, out of sight, as they may not be covered by their travel cover in the event of loss or theft. This may be tricky on crowded trains, but try to keep valuables on you or nearby. Greg Lawson at Columbus Direct suggests clipping a rucksack to your seat or another immovable object to act as a deterrent.

Finally, don’t be stung by high exchange rates at the airport or charges on your credit card as both can really eat into your holiday budget. Pre-ordering your foreign currency at a site such as ICE or FairFX, rather than exchanging your money at the airport, could save you £82.41 on €1,000.

Bob Atkinson at Moneysupermarket.com said: “Most credit cards will start to charge you interest the moment you make a withdrawal from an ATM, which could mean a hefty bill on your return, in addition to currency loading and cash withdrawal fees.”

Debit cards also typically charge a usage fee of up to 3% for cash withdrawals overseas plus an ATM fee (£1.50 to £5) plus a transaction fee of £1.50 – whatever the purchase.

A cheaper option may be a prepaid currency card in euros or dollars from the likes of FairFX, Caxton FX or WeSwap. They are loaded from your debit card and lock in a known exchange rate at the time of purchase.

HAPPY EASTER EVERYONE…WHATEVER YOU GET UP TO!

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Filed under Bargain hunting, Insurance, Leisure, Personal Finance, Train travel

Could this be a generation Y Budget in disguise?

Iona Bain

In the countdown to the Budget this year, few commentators expected any great surprises to emerge. Well, we were wrong.

George Osborne has pulled a total flanker by blowing access to pensions wide open, pledging some form of financial guidance for every worker approaching retirement on and bundling in the two tax-free savings allowances into one bumper ‘Nisa’.

The question is this; how will this transformed savings and pensions landscape affect generation Y?

On the surface, the Budget’s announcements all seemed rather remote from young people’s concerns. Opening the floodgates on pension access has been seen as a shameless ploy to grab the Grey vote ahead of next year’s general election. After all, George even unveiled what I call a ‘granny’ bond, paying supposedly above-average rates to the older generation on their hard-won savings, though it is unclear whether they will beat inflation or not. 

But you won’t find any granny-bashing or calls for a more youth-friendly budget here. Sorry to disappoint!

On the contrary, I think this could be a generation Y budget in disguise.

Let me explain. Nobody will escape the implications of George’s decision to raise the total allowance to £15,000. With one fell swoop, he scrapped all the senseless restrictions currently in place that potentially deter people from using this vital tax shelter. This year’s Budget will mean that you, me, anyone with a little nest egg can build up our savings into a far more meaningful amount either through cash, stocks and shares or a combination of the two. (And why on earth was it forbidden for people to transfer stocks and shares Isa funds into the cash version?)

So no more moaning that low interest rates on a puny allowance of £5,760 is hardly worth our while.

Faced with a persistent slump in interest rates, we can also slowly and carefully put our cash to better use in stocks and shares or high income funds. However, my fear is that young people will have little preparation for the risk this brings and dive into stocks and shares without a proper grounding in investment basics.

I like to think my blog and some other financial journalists do their bit to demystify the world of investing for young people, but it still can be a daunting and hugely risky endeavour, even for the grizzled old Pros out there.

And if I’m being less charitable, it is embarrassingly clear that the media is not stepping up to the plate and offering accessible, jargon free coverage of the economy and major financial issues that young people want.

I spoke at the launch of MyBnk’s Learn Money Week recently about what the media can do to help young people and will blog about this again.

In the meantime, one potential remedy for this paucity of knowledge is financial education that focuses on opportunities to grow your wealth, as well as conserve it. I support share picking competitions as much as initiatives that encourage children to save.

Young people are not necessarily prizing fun today over security tomorrow, but we could do more to embrace the instinct to save – perhaps an instinct that this Budget will help kindle?

And removing the stranglehold that annuities has on our income options in retirement is no bad thing for young people in the long-term, given how much the public have been alienated by the smoke-and-mirrors approach that providers take when converting a big pension pot into an adequate income. The rates offered across the board can differ massively, so having more freedom about what you do with your pension takes some of the power out of this lucrative industry’s hands.

All this comes as young people are encouraged to put more and more into pension pots, as they feel their incomes lacerated by university debt repayments, various taxes and sky-high rent.

It’s imperative that they receive proper guidance and education about the best ways to use that pension pot to ensure an adequate, dare I say very respectable income in retirement. That process should start at an early age, both at home and in the classroom, right into the workplace.

The government will offer everyone in defined contribution pensions, today’s most common of workplace schemes, the “right-to-advice” or, as the Budget’s mammoth documents clarified, “right-to-guidance”, given that only qualified professionals are allowed to give advice.

So where will that come from? Only time will tell, as the government limbers up for a big consultation with the industry on precisely that issue.

But the big ‘takeaway’, as financial analysts  like to call it, is the surprising emphasis on saving in this Budget. Because as hard as seems sometimes, saving is also the foundation of our own budgets, if we want to ensure we’re not just living day-to-day

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Style – & stereotypes – over substance

BBC 2’s Mind the Gap fails to explain why London’s economic success is more than a feeling

by Iona Bain

 

The BBC is finally catching up with what most of us have already realised – we are living in a two track economy

The first part of Evan Davies’s slickly-filmed ‘Mind the Gap’ told us 58% of London workers are graduates, with throngs of workers packing into the City honeypot, the UK’s all-powerful magnet for young people.

Sadly, a credible explanation was wanting – the only one really offered was the capital’s self-reinforcing cycle of growth, which most of us can discern.

But there were too many protracted case studies and not enough hard economics, with scant attention paid to the vital importance of housing and its spiralling cost to young people and to the city’s essential workers, not to mention its professional middle-classes who the Financial Times revealed last month are being gradually priced out of one borough after another.

Seamier subjects such as the riots of 2011, immigration, rents, poverty, and people living in cardboard sheds, were carefully avoided in favour of the sexy world of Old Street and its creative hot-air industry. The rest of the UK, meanwhile, has so far been portrayed in two images – the thoroughly sensible Kenton Robbins standing on top of a Yorkshire hill, and a derelict cotton mill in Hebden Bridge.

The overly smug Davies’s main economic discovery was that proximity fuels productivity. But isn’t this fast-paced, honeypot economy coming with serious disadvantages for employees? Employers craving status invest in high spec headquarters in the City, set higher and higher standards that only qualified graduates can attain and then, naturally, grab all the starry-eyed young talent for themselves.

by DAVID PROCTER – http://www.david-procter.co.uk/portfolio.html

So young people who have been encouraged to go to university are led to believe that all the opportunities cluster in London thanks to these aggressively expansionist employers – like the self-satisfied Google boss – who didn’t trouble himself about where his workers were going to live.

But according to Robbins, “it’s only a feeling”…..London is not the only place to be, and as London’s fortunes are built on the hard graft of young talented employees, what will happen now they are being squeezed too far and struggling to maintain living standards?

Location does matter but the wishy-washy rhetoric of the technology and PR sector, profiled in the Silicon Roundabout segment, does not an economy make, and other professions do not need all that highly inefficient office buzz and can take advantage of remote working. Most employers would agree that team work is essential but the kind of open plan group working that Evan Davies obsesses about is not representative of the wider economy, even the creative sectors.

Boris Johnson exposed his wrong-headed theory about London’s benefits for the economy – pile on as much jam as possible here and hope that some spills over – when he asserted that Edinburgh wouldn’t have a financial sector were it not for London.. He must have forgotten the long and illustrious history of financial services in Scotland – or did the bad behaviour of Fred the Shred wipe our memories clean?

Our nation doesn’t have to rely entirely and pathetically on London working well. It needs companies and investors who are prepared to look through the gloss of lattes and corporate jargon about working together – that cements London’s competitive advantage and instantly excludes the rest of the country – and see that the very bloatedness and distortions in London’s economy will create another force: not centrifugal, but dispersing…..and it is already happening. Those organisations, and the young workers they need, must have the courage to invest their time, energy and creativity elsewhere.

Already Manchester is becoming the UK’s most vibrant city for young people, while I know from my experience as a financial trade reporter that many financial companies are choosing to be based elsewhere. Lets hope Davies digs a bit deeper than his stereotypical abandoned mill next time.

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