In financial planning, the experts often talk about “key life moments”, when people who are usually disinclined to think about money suddenly have to for some reason.
Those reasons are common to all of us, although they may happen at slightly different times and you might go through some of these life events, but not all.
The main key life moments, from a financial point of view, are:
- University
- Your first home
- Getting married
- Having kids
- Buying a family home
- Getting divorced (ok, ok, but the stats are there)
- Retiring
- Managing the financial affairs of a loved one/ inheritance
Most marketing of financial products focuses on one of these key stages. Student accounts for university, personal loans for getting married, junior ISAs for the kids, and so on.
Financial Products for People with Ethical Values
For those of us who prefer to think about things other than money most of the time but are also ethically-minded, the problem is that when there is a financial need, we are blindsided by it, and more often than not end up making a decision that doesn’t necessarily conform to our values.
For example, panic plonking your inheritance money in an emerging markets ETF that invests in mines in Africa and retail goods from China, rather than a much kinder renewable energy ISA from Abundance.
The first thing to say about meeting any financial life goal sustainably is to remember that slow and steady wins the race.
There is no point setting up a direct debit for £200 a month to invest in a sustainable stocks and shares ISA if you can’t commit to that amount every month, or else you will find you are withdrawing your savings to pay yourself back quite quickly. Start small and build.
Whatever you are saving for, even if you don’t know what it is yet, regular manageable direct debits every month are a good idea, because this forms a habit. Relying on occasional one off deposits means you run the risk of not doing anything.
But the slow and steady principle should also apply to your expectation on returns. Most sustainable investments deliver fine but not eye-popping returns.
Be content with 5 to 7 per cent. It even rhymes. This way, you are less likely to lose out to volatility – something stock markets are rather prone to. Sustainable equities can also be volatile, of course. Returns usually reflect risk.
Investing into a stocks and shares ISA, means that up to £15,240 will be tax-free. You will still be able to access your cash if you need it, but your returns are likely to be higher than with savings, especially at the moment, with the base rate at 0.25 per cent.
Cultivate a Regular Savings Habit
The next thing to say is that you should save (or better still invest, given this low interest environment) regular amounts. You should make regular deposits even if you don’t have a specific savings goal in mind, because as sure as you are to find Jade Jagger in Ibiza, you are sure to need those savings at some point.
Many ethical funds, like this B Corp certified WHEB Sustainability fund, are listed on Hargreaves Lansdown, which is a pretty decent platform for those who want to choose green funds as they tend to be easier to find on Hargreaves than on some other platforms, and it offers monthly deposits of as little as £25.
EQ Investors is a platform that offers ready-made Positive Impact Portfolios that mean you don’t have to think too hard about what your ethics are, because they’ve done the thinking for you.
Bristol-based Rathbone Greenbank is a discretionary wealth manager with a major focus on ethics (no lip service here). Although it requires reasonably large portfolios from new clients.
Also bear in mind that the most convenient option for you is almost never the best option for the planet. That’s because the big institutions that can afford to be in your face at the times when you are thinking about money are the ones least likely to be honestly committed to ESG (that’s Environmental Social Governance and is investment speak for ethical these days).
There are exceptions to this, and there are some perfectly good banks and building societies on the high street, such as Nationwide and Co-op (although the latter has lost some of its ethical credibility recently).
But generally speaking, ethical organisations are smaller and more low key. These include Triodos, Charity Bank and Ecology Building Society. Great places to put your money for the long term and forget about it til you need it.
University
The best student account for value with values, in Good With Money’s view, is from Nationwide. There are no inducements, as with the other big banks, or huge overdrafts that will cripple you when you leave uni, just straightforward money management. Don’t be tempted by the sweeteners.
First home
A Help to Buy ISA is a good place to start. The Government tops up your contribution by 25 per cent. Lifetime ISAs come in next year and are even more generous. The important thing is to work out the size of deposit you need, then work out what you can put away monthly, then how many months it will take. The big banks all offer Help to Buy ISAs, but we’d rather go with Nationwide or Virgin Money, which have a few more ethical credentials.
Marriage
It’s not so much the marriage as the wedding, with the whopping £20k bill. If you haven’t saved up enough to cover this AND the first home, it might be time for a personal loan. The peer-to-peer lenders cut out the banks, so they can be a good, more transparent source of borrowing, if not the very cheapest on the market. Zopa and Ratesetter are the biggest but there are others, such as Lending Works. Rates are around 7 per cent for borrowers.
Kids
They cost more than a Chloe handbag habit to sustain. You can save up in the usual ways (above) before you have them to ease the pain of the outgoings when they arrive. Then you can set up junior ISAs so they can at least take care of themselves when they reach 18. Read the Good With Money Junior ISA guide if you are at this point in life. Warning: not all those that claim to be ethical really are.
Retirement
Proper planning for this take’s a working lifetime, but you’ll want to give it extra attention as the years pass and you become more interested in what pot you will have when you stop working.
Finding an adviser is a good idea as you approach 50 and retirement looms larger.
Robo advisers such as EQ Investors are great, but less tailored to individual circumstances than a human IFA.
Castlefield is a group of ethical IFAs committed to matching your values with your money.
Using an adviser means you are also covered by the Financial Services Compensation Scheme for bad advice if an investment goes wrong.
Inheritance
A large sum of money that you don’t know what to do with requires a good adviser too. If you are a novice DIY investor, you could end up investing your inheritance in all sorts of things that sound lovely and ethical – like eco houses in Brazil, but turn out to be financially disastrous.
Sad though this is to say, many investments labelled eco and green are not sound – they are marketed ethically so that people sign up with their heart rather than their head. But there are far more out there that are reputable. If you aren’t sure, then an expert to hold your hand – or a robo advice portfolio builder if you don’t need the very tailored advice, are sensible options.
Whatever your life stage, remember that there is probably now a more sustainable alternative to whatever you find first in a Google search. Sustainable money lasts a lifetime – choose wisely, and we all win.
To visit Good with Money – http://good-with-money.com/
Photography Credits Benjamin Child at Unsplash ; Picture of Journalist Alison Jane Reid by Elisabetta Landoni
