Q&A about Family Finances with Ffrees Co-Founder, Alex Letts - ANSWERS BACK

[RachelMumsnet]

Family finance champion, Alex Letts is on hand this week to answer your questions on family finances.

Has your family finally reached the point where enough really is enough when it comes to price rises? Do you want tips on how you can make your money go further? Is your family feeling the financial squeeze, as costs rise and household income stagnates?  Do you feel that families are getting a fair deal/ Are you confused about the best way to save your money? Is your family saving as much as they would like to?

Send your questions to Alex before the end of Sunday 21st January and we'll link to his answers on the 28th January.

Alex has been a hardworking entrepreneur for most of his working life and has now created Ffrees Family Finance to get families a better deal by harnessing families' buying muscle and combining their economic and social power. He's also the author of Jo's Blog which is becoming the champion of families, as they try to reclaim the concept of fairness from the politicians and media.

The concept of Ffrees is to save money from the everyday purchases you make, this automatically goes into a saving fund which gets a yearly bonus (2%) helping you to save easily and painlessly.

Ffrees offers rebates on everyday purchases such as groceries, clothing and entertainment whilst additionally offering rebates on insurance, utilities and even buying cars. These rebates average at 6% and can even go up to 20%. For more information on Ffrees please visit the site: www.ffrees.co.uk

[gazzalw]

Sounds great.

We save money every month but it seems ridiculous that the return on our monthly investments is lower than the rate of inflation. I remember the good old days of 10% interest on savings...

It feels as if we are saving money every which way, and we've even stopped drinking this month and that is making a difference. However, it's a sad state of affairs when one gets to middle age with a good job and still it's a struggle.

What are your top 5 day-to-day money saving tips?

[millie0210]

It is a struggle to live these days and any financial advice will be useful to us all.

[nannynick]

For those of us who are able to save but we have a mortgage, should we save (such as using ISA allowance) or should all/some be put towards decreasing mortgage?

Is there an order to how its best to pay off debts/save? For example paying unsecured debt I see as being high priority but is paying off mortgage the next step or should there be say 6 months (maybe more) salary saved in an easy to access place before starting to pay off mortgage?

[SarahLow30]

I really don't understand the draw of cashback schemes, what makes frees so differnt from the others, and can spending money really save you money?

[Wigeon]

I am also interested in getting the balance right between savings and putting money towards paying off the mortgage.

At the moment, we have some savings (in cash ISAs), and have been considering whether it would be better to put that money towards reducing the mortgage. But two things are stopping me: firstly, I'm worried that if we put spare money on reducing the mortgage, it's then "lost", and we reduce the size of our "for emergencies" cushion, whereas if it's in ISAs it's much more accessible should we need it. Secondly, when I asked the mortgage company how much our monthly payments would be reduced if we put £x as a lump sum into reducing the mortgage, it turns out we would actually only save a tiny amount each month on our mortgage repayments.

So I think I find it hard to believe that it's actually worth putting some of the savings money into the mortgage as it only seemed to make a tiny bit of difference. I think I just about get the concept of compound interest, so I have a vague feeling that it's A Good Thing to do. But it almost feels like just chucking away money (even though I know logically it's not), since we'd transfer £x and it would completely disappear. Unlike buying a new TV or going on holiday !

I think I need someone to tell me whether it is really worth trying to reduce the mortgage or not, vs keeping money in savings.

[councilhouseandmanners]

As a single mum, i find it v.difficult to save any money at all and all my money ends up being spent on my DS,

do you have any tips to make my money go further?

[TractorKate]

My husband and I have been paying into an endowment for about 13 years. Like many endowments it was sold to us on the basis that it probably would pay off our mortgage but currently there is a shortfall. (We have an interest only mortgage). However it is a considerable sum and we now think we will be able to pay it off by monthly over payments and without using the endowment money. Would we be better to cash it in and put it into some other type of savings for our retirement? I realise it's hard to save at the moment but what would you recommend?

[popsgran]

recently had a similar dilemma.ie should we pay off extra on our interest only mortgage or save the money.When we took advice the answer was if you can get about double the rate of interest in an isa compared to the mortgage interest we will have funds to pay it off plus extra. another thing to consider i that we may wish to move house and need the cash.we have found an isa which fits the bill.

[Floweryhat]

Interesting looking at their website team to see that of the senior mgt only one is female, and in fact looking at the photos she is one of only three women on their team of 15 people.

How does Alex think hard working mums can earn more and achieve gender and pay equality in the workplace? That would really help a lot of families.

[Skyebluesapphire]

It looks ok but at the moment I use Kidstart which saves money for DD. I've earned over £300 in five years

[Jayne266]

I would really like help with my house options with my mortgage am I stuck in my current house?

[mrmuscle123]

After googling this company there's a bad review from martin lewis, other than this it sounds like a good idea especially with asda in the list, i can imagine myself getting something back from what i spend weekly.

what are your top 10 ways to save money for families?

[Love33]

Me and my husband are both on low salaries and can pay all our expenses but can't save anything. Will we have to rent forever or are there ways to buy a house with no savings?

[williaminajetfighter]

Is there any merit in downsizing a property to create a lump sum of cash savings or is the money best left in bricks and mortar.

Example would be selling house for 400k. Buying much smaller at say 320k. After selling fees, legal fees and stamp duty as well as moving costs I would expect about 55k left to put away. But of course a property worth less will not generate as much equity with a rise. But lose less with a fall in value.

Thoughts?

[Moominmammacat]

I'll have two DSs off to university shortly. Received wisdom seems to be take out all the student loans and worry about it later. But they will be paying 6'6% interest from day one. If DS 1 borrows £50,0000 he'll be paying back £156,000. Unless he never earns enough to pay it back, this seems like a terrible idea. I could scrape the money together and just pay it upfront or I could take out a cheap re-mortgage. What do you think is best?

[LoganMummy]

Whats your views on credit unions? We currently save with our local one and get a good rate (used to be dividend). Do you think CUs will continue to pay good rates or are there other options that you think are better?

[RachelMumsnet]

The Q&A is now closed. We'll be linking to Alex's answers later in the week.

[RachelMumsnet]

Alex's answers are now back and we're going to post them up now on the thread. Thanks to everyone who joined the Q&A.

[AlexLetts]

@gazzalw

Sounds great.

We save money every month but it seems ridiculous that the return on our monthly investments is lower than the rate of inflation. I remember the good old days of 10% interest on savings...

It feels as if we are saving money every which way, and we've even stopped drinking this month and that is making a difference. However, it's a sad state of affairs when one gets to middle age with a good job and still it's a struggle.

What are your top 5 day-to-day money saving tips?

Hi gazzalw, I admire your resolve to stop drinking as the current economic climate is enough to have the opposite effect.

Rather than my reeling off ways to save which you may already know, try a new way of looking at the family budget which might help you save an awful lot more.

We worry a lot about our rate of interest on savings. 2-3% if you are lucky at the moment and that will be taxed too! If you save £100 a month, that would be £24-36 in interest a year. After tax it will be up to 40% less! It?s worth having but it won?t change your life.

Now as a family we spend 20 x what we might save in a month. Just say that?s £20,000 a year (yes, I have 4 DS?s). Now apply a target rate of saving 5% across the board with a scheme (I have to say this) like Ffrees. That?s £1000 saved, and it?s tax free.

Hmm? £1000 tax free, or £30 before tax? I know which would rock my boat.

It?s not quite the same thing, I know, but the ?rate of saving? on what you spend is much more significant than the ?rate of interest? on what you save.

I?m not saying spend more; I am saying apply a saving rate to what you do spend, and you will be amazed.

It?s your money. Get it back! I?d be interested to know roughly what you think you spend each month and if the savings would make a big difference to you?

[gazzalw]

Thanks Alex

Well I think we probably spend about £20,000 a year too....Yes, I can totally see where you are coming from on the tax free payback as opposed to official savings schemes....

[AlexLetts]

@millie0210

It is a struggle to live these days and any financial advice will be useful to us all.

I know thing might seems a bit bleak, but do look at what I have said to gazzalw above.

Financial advice is not something I am licenced to give (you need to be FSA regulated to do that and I don?t want to end up in Belmarsh Prison) but I can give you my analysis based on doing our research, if that?s any help.

You are not alone, even if it feels like it you against the world. Things are pretty awful for most of our families. In the Ffrees research we did in the past 4 weeks, 47% of Mums said that they don?t have any me-time treats at all. Families are feeling the pinch right across the board.

In terms of deals, look at the really large items of your budget, as these areas often have much more ?margin? that can be given back to you. Financial products have such margins. Mortgage arrangement fees (if you change your mortgage to get a better rate). And please don?t be fooled by the points schemes by grocery retailers. These amount to about 50p for every £100 you spend! Such a fuss over less than 0.5%!!

[AlexLetts]

Hi nannywick and Wigeon, Well here?s the formal reply: if you need financial advice on what to do, you should speak to an IFA or an independent mortgage broker. The 'financial advice' I offer is how families can make their money go further.

But?..do you remember how annoying it was when your grandparents said ?never a borrower nor a lender be?! Maybe it?s just that I?m getting old but why would anyone choose to pay a fee for a new investment product as opposed to reducing existing debt? The normal rule of thumb is

1. pay off your highest interest rate of borrowing as a priority
   
2. pay off the remainder of your borrowing
   
3. save
   
   The goal is to get rid of interest on debt, which is usually much higher than on savings.
   
   If you need the comfort of a cash cushion, you might investigate an offset mortgage. These products allow you to use your savings to reduce your mortgage, whilst still allowing you access to your savings. (Best of both worlds?)

[AlexLetts]

@SarahLow30

I really don't understand the draw of cashback schemes, what makes frees so differnt from the others, and can spending money really save you money?

I do think that cashback schemes have a role. If you are trying to get the best price, it?s just another form of discounting and, well, why say no to a decent discount after all!

Ffrees doesn?t see itself as a cashback scheme. The Cashbackers? job is to put the cash back in your pocket so you can re-spend it. Our aim is to help you save it up, and, actually to help you target on saving for something without having to set money aside. Neither is necessarily better, but they are different approaches to differing goals. Also with Ffrees the entire family can save into one pot.

You touch on a good point about spending and saving. It could be a real snake-oil salesman promise in the wrong hands,: ?The more you spend, the more you save, spend spend spend!!!?. That?s not the aim. Our promise is to help families save up from what they need to spend. This means that any family can afford to save if they shop via Ffrees. I hope you will give it a chance. Let me know.

[AlexLetts]

@councilhouseandmanners

As a single mum, i find it v.difficult to save any money at all and all my money ends up being spent on my DS,

do you have any tips to make my money go further?

Hi councilhouseandmanners

With 4 DSs, I know the problem. You think ?this month I will put something aside? and then, bang, along comes the cash call from DS. I know, I know?. I?m plugging Ffrees, but this was the very issue that kicked Ffrees all off. I figured that I needed to get the DSs inside the tent, not outside of it, and to include them in the concept of saving for the family, as opposed to the DSs wonderful obsession of ?me myself?.

Do you remember something from the analogue world of the 1970?s called Greenshield stamps, or is this just because I am ancient? It was a family discussion what we would save up the stamps for and lots of debate around the Electric Carving knife or Slow Cooker or some such 70?s electro-wizardry. Great excitement when the Big Day arrived.

Try to engage DS in a chat about what the family might save up for and set him a budget and a target that he can contribute to. If he does chance to use the word ?us? or ?we?, then at least you know you are making headway! Should we have a DS/DD quarantine zone on our site?!!

[AlexLetts]

@TractorKate

My husband and I have been paying into an endowment for about 13 years. Like many endowments it was sold to us on the basis that it probably would pay off our mortgage but currently there is a shortfall. (We have an interest only mortgage). However it is a considerable sum and we now think we will be able to pay it off by monthly over payments and without using the endowment money. Would we be better to cash it in and put it into some other type of savings for our retirement? I realise it's hard to save at the moment but what would you recommend?

Sorry this is one for an IFA, or mortgage broker perhaps. You have my sympathy as I was mis-sold too, a long time ago, and if the garbage I was sold by Allied Dunbar?s rep had come true, I would be sitting on a nice fat pile of cash now.

I will add that in my opinion any options that save you money are definitely worth consideration, so if you know you will save yourself money by taking one particular action then I would see this as the best option.