Saving isn’t something that comes naturally to all of us and many people live from month to month financially, which can be difficult when it comes to times when you really need money in an emergency. This can be anything from an appliance breaking down, home or car maintenance to needing to travel somewhere. Having regular savings isn’t just about paying for the things you want, but more linked to security and knowing that if you need something urgently you have the money to pay for it.
If you’ve ever read anything about building wealth and managing your finances better you’ll know that the general rule of thumb is to save 10% of everything you earn. Now we know that this isn’t always going to be possible, but as a starting point it’s a good guideline. Let’s keep it simple; if you earn £1000 a month, to save 10% would mean you would need to save £100 a month – does that seem reasonable? If it isn’t then work from this until you reach a figure that is. Even saving 1%, just £10 a month, is better than saving none at all.
Credit unions are all about serving people and improving the financial wellbeing of the local community. One of the ways they do that is by forging relationships with local organisations to set up payroll deduction schemes.
How do Payroll Schemes Work?
The best way to think of a payroll deduction scheme is in the same way that a pension payment is made; directly from wages or salary. A link is set up between the credit union and the payroll department of the organisation. Members of staff sign up and open a credit union account and then specify a savings amountto be deducted each month or week. The amount is deducted from the net salary (after tax) and transferred directly into their credit union account.
Why is it easier to save this way?
One of the biggest mistakes people make when saving is that they wait until they have paid or bought everything else before deciding what to save. Returning again to our point on building wealth and managing your finances better, you should always pay yourself first. Now we are not suggesting you avoid important bills or payments, but by considering a regular saving amount you can afford and paying that first, means you are more likely to succeed with your savings than if you consider it as an afterthought, once you’ve paid everything else. By doing it this way, the savings amount becomes an important payment you make each week or month, but the beauty of it is, you are paying yourself! We all deserve to have the security of savings and this is a tried and tested way of doing it.
Just like any other banking organisation, your credit union savings are protected by the Financial Services Compensation Scheme up to £85,000.
Are there any other benefits of joining a Payroll Scheme?
Yes! Part of managing your money better is being able to borrow when you need it. If we dipped into our savings every time we needed something we would have nothing left and so you may wish to borrow from time to time too. Credit unions often give a preferential loan rate to their payroll scheme members. Once a credit union member, payroll scheme organisation members can apply for a loan and have the loan repayments made in the same way; deducted directly from their salary. For peace of mind and confidentiality, payroll departments do not have any information on what the payment you are making to the credit union is for (i.e. it could be for savings or loan repayments). You only have to specify the amount and frequency. The payment is simply sent to your loan account for repayment.
How can I join a Payroll Deduction Scheme?
A lot of local councils and housing associations will already be members of a payroll scheme. If your organisation isn’t you can simply approach your HR department and ask them if they would set one up. Credit unions have teams who work on this specifically and the process is quite simple in terms of setting a up the scheme and putting everything into place. You can find out more about the Nottingham Credit Union Payroll Pro Scheme by clicking here and share with your employer by visiting and when you land on the page and have read the information you can watch the short video that gives you an overview too.