Four ways to choose good boxes for your money

A 10 to 20-minute read – depending on your speed

This is the third of four Insights on how to choose the right boxes for your money.

Our aim in this series is to equip you with an eight-point checklist for assessing any financial product (or strategy) that anyone could ever put to you.

And we’ve designed this checklist to be impossible to forget!

What we’ve covered and what’s coming up

In the first two Insights, we saw why professionals use checklists in all complex environments and how complex the money box landscape is.

We’ve seen where the task of selecting money boxes fits in the broader process of designing your financial life plan.

And we’ve learned why your ideas (about what you want to have, be, or do in the future) should determine the money boxes you need.

We’ve been clear that there’s no such thing as a perfect money box for everyone. And that it’s our unique circumstances and ambitions that make your (money-box feature) priorities unique to you.

So, you cannot take shortcuts (by copying friends or family members) when choosing financial products.

You need a checklist to consider the pros and cons of your options—and to prevent yourself, your friends, and your family from losing your life savings to scammers.

We also offered guidance on how and when you could use this checklist – and suggested five things you can do if your financial plans are not yet on track.

So, if you’ve not yet done so, please read the first two Insights before this one.

Now, we’ll start to unpack this eight-point checklist – with examples of how each check could help you choose good boxes for your money.

FILTRATE starts with the letter ‘F’, so that’s where we’ll start!

Check ‘F’: Is there any Free Money available with this money box?

It’s certainly worth asking what free money (or other benefits) are on offer from the Government or your employer to help you with your financial (and personal) wellbeing.

For eligible employees in the UK, your employer must (by law) contribute to your workplace pension, provided that you pay in, too.

Details on eligibility and minimum employer contributions to workplace pensions can be found here.

In short, at minimum levels, the ‘free’ employer contribution adds 60% to the ‘gross’ (before tax relief) amount that you pay in, so that’s a lot of free money for you.

Indeed, many employers offer even more generous matched contribution pension schemes, which, up to certain limits, add 100% to your gross payment. And some employers pay even more than that.

Let’s put this in money terms.

In a matched contribution pension scheme, each £1,000 gross contribution from you (up to a limit defined by each scheme) is matched by a £1,000 employer contribution.

This means that £2,000 goes into your pension pot at a cost of just £800 (or less if you’re a higher-rate taxpayer) from your take-home pay.

(£800 is your personal cost, after 20% tax relief, to make a £1,000 pension contribution) 

So, if you’re employed and not already doing so, you may want to consider paying enough into your pension to maximise the amount (of free money) that your employer pays in on top.

Beyond pensions, some larger (private sector) employers also offer various types of Employee Share Incentive Plans.

Some plans give you FREE Shares in your employer company, while others give you a discount on the price of shares you can buy through a Save as You Earn account.

It’s all effectively free money at your place of work.

And in addition to pensions and share incentive plans, many employers offer one or several of these other employee benefits on top:

For financial advisers, planners and coaches

This educational Insight is one of many we’ve created for you to use under license in your business to help more people make better financial decisions – and see the value of professional advice.

You can brand these licensable insights to your business style and add your own firm’s calls to action.

If you have any questions, please email me at hello@paulclaireaux.com