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Money management app, Money View and ICICI Prudential Mutual Fund, have partnered to announce the launch of an innovative app-based solution to allow users to save and grow their money smartly. Money View, through its Green Account platform will offer two new products known as Savings+ and Tax Saver+ to facilitate users to take a step ahead towards their financial fitness, the company said in a statement.
Savings+is designed to get users in the habit of saving money regularly for their short and medium term goals - like buying a car, taking a family vacation, creating an emergency fund, etc. The product serves as a suitable alternative to traditional saving options. These savings could grow by allowing users to park them in Liquid Funds offered by ICICI Prudential Mutual Fund. Furthermore, such schemes usually have no exit load or withdrawal penalty, which gives users the flexibility to withdraw the funds whenever they need.
Tax Saver+, the second product offered through this partnership, helps users save on their tax by investing in Equity Linked Savings Scheme (ELSS) option provided by ICICI Prudential Mutual Fund. Users can save up to Rs. 46,350 in taxes depending on their tax rate by investing up to Rs. 1.5 lac annually.
ICICI Prudential Mutual Fund and Money View have integrated their systems to make this offering completely digital. To take advantage of these products, the user can create a new account by completing a quick and easy paperless application form within the Money View app and start investing through Savings+ and Tax Saver+. The user can not only invest from the app but also manage their portfolio, invest more or withdraw funds (subject to applicability of lock-in period for ELSS) anywhere anytime with just a few taps on the Money View app.
ICICI Prudential Mutual Funds Abhijit Shah Head - Marketing, Digital and Customer Experiencesaid,This partnership is aligned with our objective to lead the way in digital initiatives in the personal finance and investment management segment. India has an ever growing base of smartphone users who are keen to digitize every aspect of their lives including money. Our association with Money View - which already has 3 million strong user base, will help us tap into this large segment of people who are smart, tech-savvy and open to a digitally-driven way of managing and growing their savings.
We are excited about our partnership with ICICI Prudential Mutual Fund and the introduction of this new platform is an effort aligned with our core focus to make managing money simple, smart and secure for Indians. Our existing app helps people to smartly manage their finances and save more money, said Speaking about the partnershipMoney Views Co-Founder, Puneet Agarwal.
With this association, we are now facilitating people to not just Manage and Save but also to Grow with these schemes offered by ICICI Prudential Mutual Fund, he added.
This new feature will allow users to better manage their savings in a convenient and digital way from the app itself. According to the company, more than 3 million Indians have benefitted from the app and taken a conscious decision to become financially fit. The launch of a platform offering these two products transitions the app from being a budget management app to a personal money manager by providing smart options to save and invest their money on-the-go.
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The tax you pay on savings income will be all but scrapped in April when savers will be allowed to earn £1,000 of interest tax free.
The personal savings allowance comes into force with the new tax year, on 6 April, which also heralds a new £5,000 allowance for dividend income, and new bands for income tax and National Insurance.Personal savings allowance
The new personal savings allowance means that if youre in the 20% band for income tax, youll pay no tax on the first £1,000 of interest you get from savings. Currently, 20% tax is deducted by the bank or building society before you get your interest, but the changes will scrap this deduction of tax at source.
If you earn more than £1,000 in interest, youll have to pay tax through self-assessment (if you already fill in a tax return) or through an adjustment in your pay as you earn tax code. If youre a 40% taxpayer, youre allowed to earn £500 of interest tax-free rather than £1,000.
The new allowance is separate from the Isa limit, so you will be able to get up to £1,000 of interest tax-free from standard accounts, in addition to any tax-free interest you receive from a cash Isa.Isa allowance
Following an increase to £15,240 in the Isa allowance during 2015, 2016-17 Isa limits remain frozen for the year. The following are the amounts you can save in these products tax-free:
- Individual savings account (Isa) limit- £15,240
- Junior Isa limit- £4,080
- Child trust fund limit- £4,080
The tax-free personal allowance is due to rise from £10,600 for 2015-16 to £11,000 for 2016-17.
The personal allowance is the amount of income youre allowed to earn before you have pay income tax at all. The allowance diminishes when your income exceeds £100,000; in 2016-17 theres no personal allowance once your income exceeds £122,000.
Age-related allowance, which previously increased the tax-free allowance of low-earning pensioners, ends in 2016-17. From April 2016 there will be no extra allowance for taxpayers aged over state pension age.Marriage allowance
From 6 April, married couples and civil partners will be able to transfer £1,100 of personal allowance (increased from £1,060 in 2015-16) from the lower-earning partner to the higher earner, saving them up to £220 tax. As for 2015-16, you can use this only if the higher earner is a 20% taxpayer - youre not allowed to use it if they are a 40% taxpayer.Dividend allowance
Another change sees the first £5,000 you receive in dividends from investments becoming tax free. Above £5,000, basic-rate taxpayers will pay 7.5% tax on dividends, higher-rate taxpayers 32.5%, and additional rate taxpayers 38.1%.New income tax thresholds
Tax rates remain unchanged, with basic rate tax at 20%, higher rate tax at 40% and additional rate tax at 45%.
- Basic rate (20%) tax applies to income after personal allowance and below £32,000 (currently £31,785)
- Higher rate (40%) tax applies to income between £32,001 and £150,000 (currently £31,786 and £150,000)
- Additional rate (45%) tax applies to income over £150,000 (unchanged from 2015-16).
Normal National Insurance rates remain unchanged, but from 6 April 2016, contracting out will end and employees who previously qualified for a reduced rate will see this rise.
- Class 1 National Insurance (employees) is payable on income between £8,060 and £43,000 at 12%. Above £43,000 the reduced rate of 2% applies.
- Class 2 National Insurance (self-employed) is payable on income above £5,965 at £2.80 per week
- Class 4 National Insurance (self-employed) is payable on income between £8,060 and £43,000 at 9%. Above £43,000 the reduced rate of 2% applies.
Rates for capital gains tax - which you pay on substantial profits from the sale of assets and possessions - will drop to 10% for basic rate taxpayers and 20% for higher rate taxpayers in 2016-17. However, on residential property the rate will remain unchanged at 18% for basic rate taxpayers and 28% for higher rate taxpayers. The capital gains tax allowance remains unchanged at £11,100 - this is the gain you can make before this tax is payable.Inheritance tax
Inheritance tax rules remain unchanged in 2016-17, with the tax-free amount frozen at £325,000 and the tax above that level set at 40%. The extra allowance available if youre passing the family home to your children doesnt start until April 2017.Stamp duty
Landlords and second-home owners will have to pay an extra 3% in stamp duty for second properties bought after 1 April 2016, which was announced in the 2015 Budget. This is on top of the normal rate (0% on the first £125,000, 2% for £125,001 to 250,500, 5% for £250,001 to £925,000, 10% for £925,001 to £1.5m and 12% above £1.5m). The 3% supplement is charged on the entire value of the second property.More on this...
- Income tax explained- who pays tax and how it is calculated
- PAYE tax codes- what your tax code means and how to check it
- Which? Money Helpline- our experts answer your tax queries
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In December, the Federal Reserve increased the federal funds rate for the first time since 2006. This boost, which raised interest rates, should be great news for savers, who have had to accept almost laughably small yields on their cash for the past decade.
But when NerdWallet looked at interest rates on savings over the past decade and lined that up with how much people are actually setting aside, an unsettling truth emerged: Most Americans aren't saving enough money to cover emergency expenses, let alone enough to see a substantial return on their account.
Sure, it doesn't help that interest rates on savings have been so measly, hovering at just over 0% since 2008. Even savings accounts with the highest interest rates offer only about 1.05% these days. NerdWallet research shows savers earned as much as 4.5% in 2006.
The Fed meets again March 15-16 to discuss another possible increase to the federal funds rate. To understand the connection between interest rates and your savings, NerdWallet compared how much $25,000 worth of high-interest savings would have earned in 2006 (at a rate of 4.5%) with how much those savings would earn in 2016 (at 1.05%).Key takeaways
In 2006, a high-yield savings account of $25,000 would have earned nearly $887 more than it does now. That handsome 4.5% would yield $1,150.62 in annual interest in 2006. With a 1.05% interest rate in 2016, that number shrinks to $263.88.
Now, consider the difference on a national scale. NerdWallet applied the personal savings rates of 2006 and 2016 to the average disposable (post-tax) personal incomes in the respective years. According to the Bureau of Economic Analysis, the average American saved 3.3% of $33,591 in 2006 and is expected to save 5.2% of $42,350 in 2016.
Roll those per capita numbers up to the US population, and the aggregate high-interest earnings in 2006 were $15.2 billion, compared with $7.5 billion expected in 2016 -- a difference of roughly $7.7 billion.
Even with lower interest rates, Americans are saving more than a decade ago. People are generally stashing more money in savings than they were in 2006. The average American in 2006 saved 3.3% of disposable income, but by 2016, the amount saved had grown to an estimated 5.2%, according to the Bureau of Economic Analysis.
On average, Americans are saving too little. The average American is projected to earn a disposable income of $42,350 in 2016, according to the Bureau of Economic Analysis. If 5.2% of that income is saved, it works out to $2,202.20 in annual savings -- which likely isn't enough to cover a new furnace or other emergency expense.
If the saver receives an interest rate of 1.05%, the account will yield $23.25 annually. But if the savings account gets the 0.01% offered at most large banks, the saver will earn 22 cents in interest. To increase your savings, NerdWallet advises people to start saving 10% of each paycheck and work their way up to 20%.
How to save in 2016
There's no telling whether interest rates will continue to rise, but there are ways to increase your savings. Here are some suggestions from Devan Goldstein, NerdWallet's banking expert.
Save more of your income. "The average consumer isn't doing a good enough job saving," Goldstein says.
Consider this: In 2006, the average American saved 3.3% of a $33,591 disposable income, which amounted to $1,108.50. Even in the good old days, with a 4.5% interest rate, a saver earned only $51 in annual interest.
"If I can only be making 50 bucks in the best of times, then I'm not saving enough," Goldstein says.
But now, even with the average American saving more (5.2%) and set to make more ($42,350), an interest rate of 1.05% amounts to $23.25 on savings accounts.
"The hope is that rates will get better, and then you will make some money, and that will be great," Goldstein says. "But you need to be saving one way or the other."Start saving at 10%, work up to 20%
Goldstein advises saving at least 10% of every paycheck and working your way up to 20% to meet long-term savings goals, like college and retirement. Plus, the more you save, the more you'll earn.
In the short term, work to pay off high-interest debt, like on credit cards, while building a solid reserve in your savings account. "Aim to have enough money in a rainy-day fund to cover three to six months of essential expenses," Goldstein says.
Once you've established your emergency fund and achieved your short-term financial goals, Goldstein suggests looking into other saving and investing opportunities, such as CDs, 401(k)s and Roth IRAs.
"The savings account is one cornerstone of a solid financial plan, even if you're not earning as much interest as you'd like," he says.Do a strategy check
Use the recent rate increase as a chance to rethink your strategy. The higher federal funds rate will likely translate to higher interest rates offered by financial institutions, particularly if the rates continue to rise. It won't happen overnight, Goldstein says, but, "one year, two years, three years go by, and at some point, we'll all be making money on our savings again."
Goldstein suggests searching for the best rates on savings accounts. (Need help shopping for the best rate? Here's NerdWallet's analysis of the best savings accounts.)
Keep in mind that there's no account, product or strategy that will work for every saver.
"Sometimes switching accounts wholesale makes sense; sometimes it's easier to dip a toe in the water by opening a new account, saving in it for a specific goal and seeing how you like the institution and product you're using," Goldstein says. "Sometimes you may want to switch product types, going from a savings account to a CD, for example, if your goals for the money have changed."Methodology
NerdWallet used a savings of $25,000 along with the data cited below to compare the interest earned in 2006 versus 2016.
Savings account interest rates. Our research found archived publications from 2006 that show an interest rate of 4.5% on saving accounts. We used NerdWallet’s savings account data to find the highest rates offered today.
Annual interest earned on personal savings. We multiplied the savings of $25,000 by the interest rate, which we compounded daily.
Personal savings rate. The savings rates from 2006 and 2016 are from the Bureau of Economic Analysis. Personal savings rate is the percentage of disposable personal income a consumer saves. Although this amount can be saved in a variety of products, such as CDs or 401(k)s, for the purposes of this analysis, we allocated total personal savings into a savings account.
Infographic by Michael Belen.
Image via iStock.
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Joseph Rivers is a 22-year-old from Michigan who aspires to become a music producer. Looking to finally take action, he traveled to Los Angeles with $16,000 pooled from his family and personal savings to make a music video. He didn't expect what would be in store for him.
Rivers headed west via Amtrak train and switched trains in Albuquerque on April 15. He was carrying luggage and had the $16,000 cash in an envelope. Due to issues in the past withdrawing large sums of cash from out-of-state banks, he wanted to hold depositing the money until he arrived in Los Angeles.
Shortly after, however, DEA agents got on the train to look for drug traffickers. They were questioning passengers at random, according to Rivers. He also noted that he was the only black person in his train car.
According to witnesses, one agent saw Rivers and asked to search his bags. Rivers complied thinking nothing bad would happen. When the found the money, they seized it on the suspicion that it was tied to drugs.
Rivers tried to explain his situation to the agents and even got his mother on the phone to confirm the story but to no avail. He told The Journal:
"These officers took everything that I had worked so hard to save and even money that was given to me by family that believed in me. I told (the DEA agents) I had no money and no means to survive in Los Angeles if they took my money. They informed me that it was my responsibility to figure out how I was going to do that."
Such a case is known as civil asset forfeiture where it allows police to legally seize property they think its tied to criminal activity, without charging the owner of a crime. If you don't fight to get it back, the property can then be sold with a cut going to the department that initially took it. Sean Waite, the agent in charge for the DEA in Albuquerque told The Journal:
"We don't have to prove that the person is guilty. It's that the money is presumed to be guilty."
While you can refuse a search request from an DEA agent, they have the right to hold your property until a search warrant is obtained, according to Waite.
San Diego Arttorney Michael Paner, who is currently representing Rivers, wrote in a letter to Rep. John Conyers (D-Mich.) that "race played a huge role in the incident."
The LAist points out that, since 9/11, 61,998 seizures of cash have been made totally over $2.5 billion. Most of the people who had money taken away from them were minorities.
Getting seized property back is not an easy feat and can require a lot of legal fees. In a 2014 report from The Washington Post, 35-year-old Mandrel Stuart, an African-American owner of a small barbecue restaurant, had $17,550 taken away from him by police during a minor traffic stop. While he eventually got his money back, he lost his business in the process because he had no money to pay his overhead.