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Tax-free savings are for the savvy, and not just for the wealthy

THE introduction of the new Isa in last month's Budget probably didn't speak to everyone in the country in the same way.

While some people may not even have been aware that such a thing was even announced, of those that did, a fair number might have just rolled their eyes at the announcement; after all, what use is an increased annual allowance of £15,000 to somebody with little or no disposable income for whom even the previous Isa limit would have been out of reach?

Naturally it will have been welcome news for the wealthy, as many Budgets often are, but few are fortunate enough to have anything like that much cash to put aside, and so for the average person on the street, the increase will make little difference.

Indeed, such figures may even discourage people from looking into Isas, believing them to be products only used by the wealthy.

However, the true nature of the Isa is to encourage saving, by offering opportunity for tax free saving and investment regardless of your social or economic standing. While an increased Isa limit is welcomed by the wealthy, there are far more people in the country who cannot afford to put aside £15,000 (or the £1250 per month equivalent) required to meet that limit, than those that can. Let's forget about the wealthy for the time being and not lose sight of the fact that actually Isas are in fact ideal for those with lower disposable incomes.

Indeed, you may want to look at it this way: money that you put into an Isa is money that you are storing in your own personal fund. Nobody can touch that money except you, not even the Government. This means that over time you can save what could be significant amounts of cash that may have otherwise been subject to taxation.

When you boil it down like that it soon becomes clear why Isas are becoming such an important part of encouraging people across Britain to save. Regardless of income, it is hugely important that people, especially those with children, get into a good saving habit, no matter how small their monthly contributions are. The key is to let people know that saving - any saving - is a good habit to get into. Just putting a small amount away each month is a good start - you don't have to be a millionaire to take advantage of the new Isa.

The new Isas will become available on July 1, which leaves us only a few months to get the message out to the public that saving is important and that small contributions can make a big difference over the long term. As a nation, we need to inspire and motivate people to start early and put whatever they can afford away whenever they can.

It's going to be a busy few months, but one that we hope will see more people take advantage of a product that unlike many, is designed for everyone to use, from the young to the old, the rich to the poor, the financially savvy to the newly learning, everyone and anyone can start their tax efficient saving.

So what are you waiting for?

Neil Lovatt is marketing director at Scottish Friendly

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