Funding Circle UK – a solid option to put all those teacher salary savings.
This article is based on my own findings and therefore primarily aimed at UK citizens of British nationals. It may be possible for other nationalities to also invest in similar companies, however, they will not be listed in this article. The article is primarily about Funding Circle UK, there is probably an equivalent Peer to peer lending company in other countries.
Being a TEFL teacher in China certainly has its perks, there’s no denying that. With rent usually being paid for by your school, and the extremely low cost of living, it leaves you with some significant disposable income.
The question is, what should you do with this income?
The rates of interest on savings account are pitifully low across the board, making it almost as useless as leaving your cash under a mattress. Any sensible person knows, this is not a realistically viable option right now if you want your money to work for you.
Cash ISAs also suck. They are touted as being a good investment as you don’t have to pay tax on your earnings. This was a great thing in the past but now it’s not the case. Since 6 April 2016 the new personal savings allowance (PSA) launched. It means all savings are now automatically paid tax-free.
This means that you should just look for the best return. Is a Cash ISA a good choice for this? No. Even the best ones on the market are averaging about 1.9% return on your investment. Again this doesn’t make much sense if you are looking to save.
Help to buy ISA?
Finally, this is a decent option. If you are planning to return home back to the UK and you are a first-time buyer this is a great place to store your money until you are back.
But why is the Help to Buy ISA so special? Its interest rate certainly isn’t. It’s a fairly decent tax-free 2.5% – not terrible at all, but not exactly going to help you to buy any Ferraris anytime soon.
The real benefit lies in its government bonus. As soon as you reach £1600 the government will give you a 25% bonus when you get a mortgage for your first house. This bonus goes all the way up to when you save £12,000 – a £3000 gift from the government, just for saving in this type of account.
Check out the cool infographic below for the lowdown or click on it to find out more from the UK government itself.
If you are not looking to put a mortgage down on a house or are not a first time buyer then this is not the best option for you but still better than most cash ISAs
Stocks and Shares?
So you fancy yourself as the next Wolf of Wall Street or something? This option can be extremely risky and, if you pick individual stocks, almost certainly not a good choice for your extra earnings.
One way this can be viable is to buy Index Funds which are a combination of a whole bunch of shares across a market. I won’t explain all of the details in this article (ther are much smarter people who can explain this better than me anyway) but this is the advice given by Warren Buffet – renown for his investing experience.
Stocks and shares usually require a significant initial investment and you can face steep fees for transactions with most stockbrokers.
All in all, it’s not simple for a beginner and unless you have a significant stash of cash that you won’t need immediately. This kind of investment is probably not practical for TEFL teachers.
This brings me on to the next option, the whole reason I wrote this article in the first place…
This is my personal favourite. I use Funding Circle UK to lend to UK businesses and to invest the excess savings I make from my work in TEFL
The following are the reasons why I would recommend it to anyone looking for somewhere practical for their own surplus income:
- Cheap – minimal fees for transactions depending on how you deposit your money into your account.
- Low initial investment – You don’t need a huge sum of money to start lending with. I used just £250 to trial it out, you can more if you see fit.
- Support your local businesses and economy – with the rise of Brexit and anti-foreign sentiment supporting your local businesses is more important than ever if you won’t then who will? It is also pretty cool to see construction work down the road and know that you are helping to create it.
- Strong ROI – I’m currently averaging a 6.6% interest rate which is a lot better than any savings account I could find by a long way! The average estimate is about 7.4% So maybe you can do better than me if you pick better ones!
- You are in control – You can use Funding Circle UK as a ‘set and forget’ style of investment with the Auto-bid option or you can manually pick the investments and projects you think that sound good. They all have different interest rates and different risk so choose what you like!
- Super easy– the whole thing can be completely set up and ready to go in under 30 minutes – maybe even quicker if you are speedy.
With all the different kinds of places you can invest your money out there, and for the kind of money you are likely to be saving from TEFL jobs, I think that Funding Circle UK is the superior option.
You get a solid rate of return through the interest rates and you can be satisfied in the knowledge that you are helping real people looking to expand or start their businesses in the UK.