Fe all want to put money away for the future, but how can we save or invest in ways that reflect the issues we care about?
Whether you’re building up your savings in cash or investing them in stocks and shares, it’s important that you know where your money is going.
What does ‘ethical’ mean and how does it impact my life?
Ethics are the moral principles that guide everything we do. They help us to work out if we feel something is right or wrong, and are often personal to us. Something that you have no problems with might be seen as unethical by someone else, like smoking tobacco or eating meat.
Ethics play a big role in our everyday lives, especially when it comes to spending money.
“Ethical consumption” means choosing to spend money with companies that have moral values that we approve of. For example, companies that treat their employees fairly, pay their taxes, support their communities or take steps towards reducing their negative impact on the environment.
Here are some examples of how you can spend your money ethically.
Hopefully, you’ll also be able to manage your bank account in a way that means there’s also some money left over to go into a savings account.
Your money can have a big impact
By supporting businesses that operate ethically, not only are you helping them succeed, but you’re also actively choosing not to support a business that goes against your values.
If you choose to buy clothing from a company that pays its workers fairly, you’re also choosing not to give that money to a company that doesn’t.
Where you spend your money matters. Paying workers less and sourcing items in unethical ways tends to be cheaper for businesses than doing the right thing. This means bigger profit margins for them.
But if enough people look into how the things they buy are made and choose to buy from ethical businesses instead, businesses that rely on unethical practices may start losing money and consider changing how they operate to attract business again.
What is ethical saving?
When you save money in a cash savings account, your bank lends that money to other customers or invests it in businesses who come to the bank asking for a loan. You don’t usually know what businesses your bank invests your money in and it’s not something you normally get to choose.
This can be a problem if you want to keep your money out of businesses that go against your moral code - your ethics.
Ethical savings accounts
If you’d like to save in cash but you want to make sure your money isn’t supporting businesses that go against your values, you can open an ethical savings account.
Ethical savings accounts tend to commit to investing in companies that are working towards reducing how much damage they do to the environment. They are likely to have a list of criteria or a scoring system to work out which companies to invest in, but different providers will do this differently.
The right kind of ethical savings account for you will depend on which industries or businesses you want to avoid, so it’s best to look into which companies your bank invests in, if you can.
What is ethical investing?
Ethical investing means investing your money in assets and businesses that reflect your personal values, and actively avoiding those that don't.
When you invest your money, you either do this yourself or put your money in a product that invests it for you, like our Stocks and Shares ISA or Lifetime ISA.
If you choose to put your money into a product, it will be invested in a fund, where money from many people is pooled together and used to buy assets.
To increase profits, these funds sometimes invest in companies and assets that you might feel aren't ethical in how they produce money, as they could show better profits and will look more attractive to investors. Fossil fuel companies are a good example of this, as they perform well financially, but their business model is considered to be damaging to the planet.
Some people invest their money themselves by buying individual stocks and assets to make sure their money isn’t going to companies they don’t want to support. But this can be risky, especially if you don’t have a lot of experience in the stock market.
Ethical investment funds
Ethical investment funds, unlike regular investment funds, tend to prioritise investing in more sustainable, environmentally friendly businesses.
With OneFamily's Stocks and Shares ISA or Lifetime ISA, you'll choose an investment style which defines which fund your money will be invested in.
All three funds invest in underlying funds that have a climate-focused approach. These funds take steps to reduce investment in companies harming the environment, and are more likely to invest in companies that are climate-focused.
Invest YOUR way with OneFamily
Our Lifetime ISA and Stocks and Shares ISA both invest in stocks and shares. This means they have good long-term growth potential, but the value of your investments could go down as well as up so you could end up with less money than you've put in.
