Should we still bet on growth?

Euro lower against the U.S. dollar 1.52 and then 1.51. Jean Claude Trichet maintains the rate of the ECB and the markets are beginning to worry. For Asian analysts is "a first step towards a trend to lower its interest rates" is a sign that the economy of the euro zone go wrong.

It is surprising that info found in the gallery, as many economists serine us not long ago, and our president will echo that needed to make it go better than the rate of the ECB decline and when we start to consider that decline indicates that it is going badly. Should know when lower rates that go wrong or not ... It displays in the presence of a herd of Dr. Knock "the lower rate it tickles you or that you gratouille."

According to Trichet the ECB risks identified some risks to growth. Some materialize "and many economists predict a recession by the end of the year.

So we rely Question 5 of the contribution social emergency: Is there still any bet on growth?

Top 10 lessons in personal finance

What do you think of when you hear the word 'ISA'? While most would know immediately that it's a tax-free savings account, an astonishing 15% of 18-to-24-year-olds think it's an iPod accessory, while 10% believe it's an energy drink, according to a recent survey by
Scottish Widows.

Given this lack of financial awareness, it's not surprising that many young people find it hard to make the right decisions when it comes to their finances. But it's not just youngsters who are guilty of making mistakes with their money. Most of us, at some point in our lives, have squandered money on a pointless insurance policy, made a dud investment or been hit with a surprisingly large tax bill.

So, in the interests of better financial education, and to help you protect yourself from making some of the most common money mistakes, Moneywise takes your finances back to school with its top 10 lessons in personal finance.

Lesson one: Learn to live within your means

According to uSwitch, a mind-boggling 4.8 million adults in Britain currently spend more than they earn, and another nine million only just break even at the end of each month. While it's nice to treat yourself to a weekend away or a new car, living beyond your means is not sustainable - and this will become even more apparent in the coming months as household bills continue to rise.

"We're about to go through a recession, so people will have to start saving and pay off their debts. If they don't do that, they'll be in for a shock," warns Mark Dampier, head of research at IFA Hargreaves Lansdown.

If you find yourself going overdrawn every month or your credit card bill is growing bloated, it's time to go back to basics and write a budget. Once you know how much you have coming in every month and how much you need to shell out on regular expenses like food, mortgage or rent, and bills, you'll have a better idea of how much you can afford to spend on enjoying yourself. And if you're tempted to borrow, stop and think first about how and when you'll pay it back.

Lesson two: Don't save when you have debts

Saving money can make you feel good. But if you've got a big credit card bill hanging round your neck, pumping all your spare cash into a savings account is unlikely to be the best use of your money. Even if you're earning 5% or 6% on your savings, with interest rates on credit cards typically around 15% to 20% (or 30% if you have a store card) it doesn't take a mathematician to see that you would be better off clearing your debts first as they'll be growing at a faster rate.

Take a typical credit card balance of £1,812. According to uSwitch, if you just paid the minimum balance of 2% each month, with an APR of 18.33%, it would take you 29 years to clear the bill and cost you £2,857.55 in interest. So it makes sense pay off as much as you can every month. Even by stepping up your repayments to just 3% you would cut the repayment time and your total interest cost almost by half.

Of course, it's sensible to have a small emergency fund, but once you've put that away, you should concentrate on paying off your debts.

Lesson three: Financial advice isn't as expensive as you might think

There are many areas of financial planning that are easy to do yourself, but there will always be some areas, such as tax, pensions and mortgages, where professional advice can be incredibly useful. But while a lot of consumers assume they can't afford to see an IFA, this needn't be the case.

All IFAs offer a choice of payment options. This will either be a fee or they will earn a commission based on the products they sell, so you don't have to pay a penny. The rules regulating IFAs mean they do have to justify every product they offer you, nonetheless many consumers are more comfortable paying a fee as it guarantees that their IFA won't factor his or her commission into the advice.

Even if you do pay a fee for your IFA, you could still save money in the long run. Peter Chadborn, principal of IFA CBK Colchester, says that nine out of 10 of his new clients come to him having bought the wrong product. "I had a couple who came in with two life and critical illness insurance policies, for example. Only one was a guaranteed policy [if you have a reviewable policy your premium is likely to increase with time] and both of them only covered 13 critical illnesses. The monthly premium for both was £45. We found them a new policy, which offered a guaranteed premium and covered over 30 illnesses, for a total of £28.74 per month - a saving of 36%."

Lesson four: Tax planning isn't just for the rich

UK adults will pay more than £9.3 billion in unnecessary taxes this year, according to IFA Promotion's latest Tax Action report. Given how much we all hate paying taxes, Alan Phillips, divisional director for financial planning at Brewin Dolphin, says, "it's surprising how many people don't look at what they can do to mitigate their tax burden".

While tax planning may sound daunting, there are plenty of things the average person can do to reduce the amount of tax they pay. If you have savings, you should make sure you use your ISA allowance as all interest will be paid tax-free. If you're a couple, remember that you have two allowances that you could use.

If you aren't a taxpayer, double-check that you aren't paying tax on your savings. If you discover that you are, HM Revenue and Customs or your bank can provide you with a form (R85) to complete to rectify the situation. It's also worth checking that your tax code is correct and you're receiving all the tax credits you're entitled to, as well as making sure your home is in the right council tax band.

If you suspect you might be above the inheritance tax threshold - that is, if you have assets, including your property, worth more than £312,000 (married couples and those in civil partnerships have a combined total of £624,000), it's worth speaking to an IFA about what you can do to prevent your beneficiaries being hit with a whopping tax bill. This might include re-drafting your will or taking advantage of the annual gift allowance - each year you can give away £3,000 to any individual tax-free.

It also pays to make sure that any life insurance policies are placed in trust so that death benefits don't form part of your estate.

Alan Phillips adds: "Everyone should tax-plan to ensure they make best use of any allowances, and their estate is best positioned to reduce any potential IHT liability."

Lesson five: Is a savings account the safest home for your money?

A savings account is safe in so far as you won't physically lose any money, but it doesn't necessarily follow that it's the best home for your cash. Not only is its growth potential limited, making it tougher to achieve your financial goals, but you could find that its value is eroded over time as inflation continues to rise.

Whether or not a savings account is the best option for you depends on what you're saving for - and for how long, says Annabel Brodie-Smith, communications director at the Association of Investment Companies. If you expect to need your money in the next five to 10 years, a traditional savings account will usually be the best place for it. However, if you have more time to play with, equities could be a better option.

While many savers see equities as high-risk, if you have time to ride out short-term market wobbles, your money should grow much faster than it will in a savings account. Brodie-Smith says: "Over the 10-year period ending June this year, a £1,000 investment in equities in the average investment company would have seen a return of £1,980. With a UK high-interest savings account, a £1,000 investment would only have given you £1,118."

If you have more than 10 years before you need to get your hands on your money, the gap between cash and equities is even wider. During an 18-year period, a UK savings account with £1,000 would have given you a return of £1,650, while money invested in equities would have risen to £4,456.

Of course, investing is never risk-free and you could end up losing some money, but if you choose your investments wisely (see lesson six) and build up a broad mix of funds, you can get better returns without taking too much of a gamble.

Lesson six: Don't follow fashion when investing

Scanning the Sunday papers you might well see an article recommending a great new fund, and wonder if should you invest in it. No, warns Paul Dickson, head of financial planning and wealth management at the accountancy firm Armstrong Watson.

"You shouldn't follow fashion when it comes to investing, because by the time an investment becomes popular it's usually time to sell," he explains. "Look at the property market, for example. Many UK investors followed the trend of thinking 'bricks and mortar' was the perfect investment, and they carried on investing in residential property even as the real returns from this kind of investment fell."

The best way to invest is to first work out your goals, how long you want to invest for, and your attitude to risk. You also need to make sure your portfolio is as diversified as possible - put all your eggs in one basket and you'll take a much bigger hit if that particular investment falters.

It's also important to be committed to your investments and to take a long-term view. When the market falls many private investors tend to panic and cash in their investments. But this is one of the most costly mistakes you could make as you could be cutting your losses at the worst possible time.

Peter Hicks, executive director UK retail at Fidelity, explains: "It can be tempting during times of stockmarket uncertainty to delay making investment decisions or to sell existing holdings in the hope of buying back in when values are lower. In theory, this is an attractive idea, but it
seldom works in practice."

According to Fidelity, for example, if you had invested a £1,000 stake in the UK stockmarket in June 1993, it would have been worth £3,260.58 at the end of June this year. But if you had dipped in and out of the market and missed the best 10 days during this period, your investment would only have been worth £2,147.09. And if you had been unlucky enough to miss the 40 best days, your investment would be worth just £885.32- leaving you with a loss of £114.68.

Lesson seven: Ignore pensions at your peril

According to Met Life, a whopping 2.8 million homeowners are risking their retirement income by treating their property as their pension. Whether you have a buy-to-let or are planning to downsize, falling house prices could mean you get much less than you bargained for when you come to sell. Or if you were considering releasing some of the equity in your home, you might not be able to release as much money as you thought you would.

In the worst-case scenario, you could even find yourself unable to sell your property, leaving you with a house that no longer suits your needs and with no income to support you in retirement.

While pensions have had a bad press in recent years, Matt Pitcher, a wealth manager at IFA Towry Law, says: "A pension is still the most tax-efficient way of saving for retirement, as the government tops up your contribution by 20% or 40% depending on your tax rate. No other type of retirement saving gets this kind of overnight growth." If you're a part of a company scheme, you also have the added benefit that your employer may make monthly contributions on your behalf.

Lesson eight: It could happen to you

One in four women and one in five men will suffer a serious illness, such as cancer or heart attack, before they retire. Yet, despite these worrying statistics, few of us even stop to think about how we'd cope in that situation.

"Imagine the emotional state you would be in if you lost a loved one," says Peter Chadborn. "Then imagine on top of this that you could face financial ruin. Obviously, you can't prevent the former from happening, but you can prevent the latter."

Worryingly, half of the population would not be able to survive financially for more than 17 days after the loss of an income, according to research by Combined Insurance. And with household bills and personal debts continuing their upward march, people will find it even harder to cope. Policies like critical illness, income protection and life cover might not be the sexiest types of financial products, but they could offer you lifeline if disaster strikes.

It's worth protecting your mortgage and your income from the risk of death or illness - a good financial adviser will be able to recommend the right cover for you. Fully comprehensive protection may be expensive, but in this case something is definitely better than nothing.

Lesson nine: Loyalty doesn't pay

When it comes to personal finance, if you stick with the same products over the years, all the evidence shows you'll end up paying for it. Take savings accounts: Halifax, for example, is currently welcoming new savers with a tempting 6% on its Web Saver account, but those with older Halifax accounts don't get nearly such a good deal. If you have money in Halifax's Liquid Gold account, for example, you will be earning just 0.5% on a balance over £50.

The same goes for mortgages - stick with your current lender after your fixed or discounted rate runs out and you could see your interest rate rise by up to 2%. Likewise, the cost of your home and car insurance will go up each year whether you've made a claim or not. The key is to review all your financial services on a yearly basis, and switch if you're no longer getting a good deal.

Lesson 10: Read the small print

Reading the small print on any of the financial services you buy is unlikely to be the most enjoyable use of your time, but it could be the most valuable. Chadborn warns: "The consequences of not reading the small print could be greater than you could handle. What would you do if your insurance policy didn't pay out or your monthly mortgage payments turned out to be more expensive than you originally thought?"

Even with more straightforward products it's still important to know what you're signing up for. Some of the highest-rate savings accounts, for example, are likely to have strings attached, such as penalties for withdrawing your cash.

And while it's great that you can use your mobile phone while you're abroad, unless you read the small print and check the charges before you jet off, you could be hit with a surprisingly large bill when you get home.

savings account

Understanding the new ISA route map

Since they arrived in 1999, individual savings accounts have been an integral part of the UK's financial landscape. Millions of Brits have saved thousands in tax by putting their money in ISA wrappers, whether in savings accounts or seek further growth by investing in the stockmarket.

So it seems strange that, until last month, it wasn't possible to directly switch money from a cash ISA into a stocks and shares ISA without losing the tax benefits.

However, an overhaul in the way ISAs work now makes it easier for savers to dip into the world of stocks and shares. Many of the changes included as part of the government's revamp of ISAs have been reported in great depth, such as the increase in the amount you can put away in a tax-free ISA to a total of £7,200, up to £3,600 of which can be held in cash.

But perhaps the more important change is that savers who have been stashing money away in cash ISAs can now transfer this money into a stocks and shares ISA. Crucially, this can be done without the money leaving the safety of the ISA wrapper or affecting the annual ISA allowance - as long as the money isn't physically withdrawn.

It was possible to transfer cash ISAs before, but only from one ISA provider to another - for example, if you found a bank offering a better interest rate - and not from cash to stocks and shares.

Under the latest changes, however, you can now transfer some - or even all - of the cash saved into an ISA in previous tax years into a stocks and shares ISA, without fear of using up that year's ISA allowance. You can even transfer across cash that you deposited in the current tax year - but you have to transfer the full amount. Once you've done so, it's as if that cash ISA never existed.

This means that if you saved £2,000 in a cash ISA this year, then transferred it into a stocks and shares ISA, you could still put another £5,200 into ISAs that year: up to the full amount into a stocks and shares ISA or up to £3,600 into a cash ISA.

But beware - it doesn't work the other way around; you cannot move money in a stocks and shares ISA back into a cash ISA if you change your mind again, although many in the industry are lobbying for that to change.

Liz Hogbin, director of savings and investments at Lloyds TSB points out that another change taking effect: people who have child trust funds (CTFs) will now be able to roll the proceeds into an ISA when they mature, without incurring any tax penalties. However, the benefits of this are unlikely to be felt until the first CTFs mature in around 15 years.

Only the names have changed

As part of the government's ISA spring-clean, it also decided to sweep away all the confusing terminology that surrounds them. What were known as mini-cash ISAs, Tessa-only ISAs and the cash part of a maxi-ISA will now all be called, simply, cash ISAs. Mini stocks and shares ISAs, as well as the stocks and shares part of the investment vehicle formerly known as a maxi-ISA, will all now be called stocks and shares ISAs. To top it off, Personal Equity Plans (PEPs) are to be rebranded as stocks and shares ISAs too.

HM Revenue and Customs says PEP investors will get a wider range of investments to choose from under the ISA banner. However, the interest earned on uninvested cash held in what was formerly the PEP will now be taxed at 20% in the ISA, a rule that has always applied to stocks and shares ISAs. Investors may also want to consider merging existing stocks and shares ISAs with their newly rebranded PEP to help keep costs down.

It's the new ability to transfer money from cash ISAs into stocks and shares ISAs that has been most warmly received by the experts. "I think it gives people some added flexibility," says Bob Perkins, technical manager at Origen Financial Services. "In the past if they wanted to move their money from a cash ISA to a stocks and shares ISA, they would have to come out of their cash ISA and reinvest the money. Of course the problem with that is that they're using some of their ISA allowance," he says.

So, what's the big deal about it becoming easier to invest in equities? Jason Britton, co-fund manager at fund of funds specialist T. Bailey, points out that as ISAs have been around now since 1999, savers could have some serious funds stashed away in cash.

"Many cautious investors may have subscribed substantial amounts into their cash ISAs - as much as £27,000. But this may not necessarily be the best thing," he says.

History shows that over the long term, equities - or stocks and shares - tend to give you a better return than cash, Britton says. Within equity ISAs you can invest in collective investments like unit trusts for example, as well as in shares listed on a recognised stock exchange and other investment vehicles such as bonds.

"So if you want growth, you are generally advised to have some money in equities. Remember too that cash is not as risk-free as many people think. Inflation can erode the value of your cash and it looks like inflation is rearing its head again, so this is relevant."

"With interest rates set to continue in a downward trend this year, savers need to seek an alternative approach if they wish to achieve returns greater than inflation over time," agrees Philip Pearson, a partner at Southampton-based IFA firm P&P Invest. "Using the equity ISA allowance can achieve this by creating a balanced portfolio designed to minimise risk whilst achieving returns better than cash over the medium term."

But, as Britton says, there are going to be many people who think it's mad to buy equities now, as the effects of the credit crunch are felt. But he believes investors should be undeterred.

"The first rule of investment is: buy low, sell high. It sounds obvious and simple, but it isn't," he says. "When equity prices are low it's because fewer people want them. It can be quite uncomfortable to buy when everyone around you is panicking and saying 'sell!' But professional investors will be out there picking up bargains galore at the moment."

Tread carefully

That said, it is important to understand the risks associated with investing in equities before you take the plunge. As they say, with stocks and shares the value of your investment could go down as well as up. There are also lifecycle considerations to factor in - taking a risk on equities close to retirement may not be such a good idea.

Martin Bamford, joint-managing director at IFA Informed Choice, predicts there will be a lot of "aggressive" marketing from fund managers keen to get a chunk of the new money potentially flowing across into stocks and shares ISAs. "It is important that investors aren't swayed by the hype and rush into a decision about moving from cash to stocks and shares, particularly in the current market conditions, which are quite volatile," he says.

Perkins points out that the rationale for investing in equities is quite different to that for cash. "You invest in cash because you want to have access to the money in the short term and you can't afford to lose it," he explains. "Whereas you invest in stocks and shares through collectives because what you want is the benefit of greater potential medium to long-term growth and you don't actually need access to the cash," he says.

"You don't buy collective (investments) on a whim, or to hold for 18 months to two years. You generally buy them on the basis that you're going to hold them for at least five to seven years," Perkins adds.

"Whether or not we're actually going to see an awful lot of people moving from what was known as the mini-cash ISA into stocks and shares I think is highly unlikely," says Phillip Wood, director of wealth advisory at accountancy firm PricewaterhouseCoopers. "I think most people who have invested into cash ISAs have done it because they want a low-risk tax efficient investment vehicle. They've clearly made the decision that they want cash and they don't want stocks and shares," he says.

Transferring your allowance

But if you do want to transfer money from your cash ISA into stocks and shares, you can do this in just the same way as you would shift your cash ISA to another provider. That is, you don't withdraw the funds and move it across yourself - or this will count against your current ISA allowance. You select who you want to have your new stocks and shares ISA with and they will arrange the transfer for you.

There is no recommended minimum amount to transfer but, according to Bamford, collective funds typically look for a minimum investment of around £1,000, although some will take as little as £500. "But obviously, the more you can move across, the better you can create a more diversified portfolio - then you're not reliant on just picking one or two funds," he says.

Britton suggests that those people with more than they need sitting in cash that are keen to try out the world of equities - but also a little hesitant - should consider a cautious managed fund. T Bailey's own cautious managed fund, for instance, has no more than 60% in equities, with the rest sitting in less volatile assets like cash, bonds and property.

"Funds like this are a useful half-way house between cash and pure equities," he says. Meanwhile, Pearson suggests making use of a platform such as that offered by Skandia Selestia. This ISA gives an investor access to more than 900 individual funds from 60 different companies, all within a single plan.

However, whatever you do, getting advice from an IFA before taking the plunge is always a smart idea. (To find one near you, visit unbiased.co.uk or call 0800 085 3250.)

"There are so many collective investments out there to choose from that will accept you into an ISA," says Perkins. "Do you want income or do you want growth. Do you want a mixture of the two and what other investments have you got? It's not cut and dried - there isn't a one-size fits all."

For the latest money-saving tips and personal finance news, visit Moneywise.co.uk.