3 big money questions answered

MoneyPlus Features Team

Want to know how to improve your credit score, the difference between investing and saving, and how a pension actually works? Here are the answers to three big money questions.

You are young, you run free…. Or maybe that’s not quite true. Maybe you do have just the odd little money worry. We can help you with that.

From those smaller, niggling thoughts like – where does it all go? Why don’t I ever have enough? To those much chunkier concerns: how will I pay off student loans? Buy a home? And save for retirement in the future?

OK, you can’t learn everything you need to know about personal finance in one article.

But if you keep adding to your knowledge, bit by bit, you could quickly get into a happy place with your money.

So let’s get the financial knowledge party started with three big questions.

1.What’s my credit score and how do I improve it?

As soon as you hit your 20s, you’re likely to start racking up a credit score (or rating). Basically, this is information that financial companies can use to check how ‘credit-worthy’ you are. It affects all kinds of things: from your mobile phone contract, to your car insurance, to the interest rate you’ll be offered on your credit cards, bank loans or mortgage.

Having a good credit score means lenders will trust you to pay them back and you may be able to borrow money at a lower rate than if your score was poor.

What’s your score? There are free ways to check outlined here.

Easy ways to help improve your score include:

  • being on the electoral roll at your address
  • paying off any outstanding debts
  • opening a bank current account
  • paying all your bills (including bank and phone) on time.

Things that could lower your score include:

  • not being on the electoral roll
  • missing credit card, mortgage or loan payments
  • going through a bankruptcy, court debt order or debt repayment arrangement
  • being financially linked, through a joint current account, for example, to a partner who has done any of the above.

If you’ve had some debt problems in the past and landed yourself with a poor credit record, there are ways to help improve it.

For example, there are special ‘credit rebuild’ cards that you can apply for and use sensibly.

Important! If you’re worried about the amount of debt you’re in, the first step is to get the free and excellent help and guidance that’s available from, and

2.What’s the difference between saving and investing?

Saving is putting your cash aside and not spending it. You can put it in a piggy bank, jam jar, or under your mattress. But it’s likely to do better in a savings account as that way you get some interest added too, and it’s relatively secure there.

You could open a Cash ISA (Individual Savings Account). With one of these, all the interest you earn on your savings will be tax free and there’s no tax to pay when you take your money out.

Investing is putting your money into other ‘assets’. This could mean buying the shares of a company, government bonds, or gold bars, or putting your money in a fund that buys these assets.

Over longer periods of time, investing can give you a better chance of growing the value of your money and beating inflation than saving. But it’s important to understand that the value of investments can go down as well as up and you may get back less than you paid in. For example, bad news about the economy or a company could push share prices down, while good news could send share prices upwards.

For that reason, it’s a good idea to have a savings strategy for short- and long-term goals.

If you want to use your money sooner – perhaps you’re saving for a holiday or want to build a rainy day fund – cash savings may make sense.

But investments are usually better for longer-term goals such as saving towards a home. The value of investments can go down as well as up and could be worth less than was paid in. A timeframe of five years or more aims to give your investments the chance to recover from early dips and potentially grow.

Some of the most popular ways of investing are through Stocks & Shares ISAs (including Stocks & Shares Lifetime ISAs) and pensions for retirement planning.

You can find out more about saving and investing in our guide or from the Money Advice Service.

3. Why is a pension such a good idea? I’m still young!

When we ran a poll on Twitter last year, one third of the thousands who replied said they wanted to know more about pensions.

The good news is that thanks to the workplace pension an employer has to provide, more and more of us are saving for our futures. So here’s a bit more about how it all works.

Basically, if you have an employer, they put some of your earnings into a pension for you before your wages even reach you. This is your contribution.

Your employer also adds some of their money into your pension and many employers will match some or all of your contribution.

In some pension schemes the government adds basic-rate tax relief of 20%, and higher and additional rate taxpayers can claim more tax relief back from HM Revenue & Customs.

In others, tax isn’t added to your pension, and your contribution is taken from your salary before tax is calculated. This means you get all your tax relief immediately and there’s no need to claim anything extra if you’re a higher or additional rate taxpayer. Either way, the cost to you works out the same.

If you’re self-employed, you’ll be able to get tax relief on any payments you make into your pension. So the money you’re saving for your future will still get a boost, although you won’t, of course, get an employer payment.

Although retirement may seem like a very long way off, the great news is that the more and the longer you pay into your pension, the more it could grow. Though as a pension is an investment its value can go down as well as up and it may be worth less than was paid in.

Currently, you can start to take your pension money from the age of 55 although this could change in the future. So if you have enough invested, you could be retiring many years ahead of the current state pension age. By October this year it will be 66… and rising.

And that is food for thought.

You can find out more about pensions in our article What’s so good about a pension?


Tax rules and legislation may change in the future. Your own circumstances and where you live in the UK will also have an impact on tax treatment. Information here is correct in February 2020 and shouldn’t be taken as financial advice.

Pensions and Stocks & Shares ISAs are investments and their value can go down as well as up and may be worth less than was paid in.

Standard Life accepts no responsibility for the information contained in external websites. These are provided for general information only.