If you’ve got some cash to save, financial journalist Katie Morley has picked seven investment options to consider
If you’re looking for a good, safe home for your money, there are many factors to consider - like when you’ll need to spend it, how much risk you’re prepared to take and how much money you feel you can afford to lose.
1. Compare and find a good savings account
There are many different types of savings accounts, so it can be tricky to know where to start. If you know you’ll need the money over the short to medium-term - maybe for a holiday - you could look for an easy-access account that lets you get to your money without penalties. Also consider Individual Savings Accounts (ISAs) [https://www.gov.uk/individual-savings-accounts/overview], which currently let you save up to £15,240 a year tax-free. You can save cash and other investments into ISAs, but you can only open one account each year. The Financial Services Compensation Scheme protects cash ISAs up to £85,000 and investments up to £50,000.
2. Consider cash savings bonds
If you’re confident you won’t need to touch your savings for some time, you could look at savings bonds. These tend to pay higher rates of interest but you have to lock your money away for a fixed term to get it - usually one, three or five years. If you feel you might need the cash for an emergency, bonds may not be for you.
3. Current accounts could pay higher interest
Another option for easy-to-access cash savings are current accounts that pay a high rate of interest. They sometimes offer other perks, like cashback on your shopping, but they do also charge a fee in some cases. The only catch is that you must use the account as your current account, usually by setting up at least two direct debits and paying a certain amount of money in each month. There may also be limits on how much you can save and still get the higher interest.
4. Take more risk for higher returns
Sadly, interest rates on savings accounts are low, so it can be harder to make your money grow. If you’re saving up for a big purchase over many years this is particularly difficult. There are ways to get higher returns, but be aware that these investments come with extra risk. Most legitimate investments are regulated by the Financial Conduct Authority - if you’re offered an investment opportunity that isn’t, make sure it’s not a scam Live by the rule that if something looks too good to be true, it probably is.
5. Open a stocks and shares ISA
If you’ve got enough cash to cover emergencies and you’re looking for somewhere to invest your money over the longer-term maybe to fund a house purchase, you could open a stocks and shares ISA. It’s an account that lets you buy all sorts of investments and save up to a certain amount a year, tax-free. You can open one online or go into a branch, and then select from a range of investments. Remember, the value of your investment can go down as well as up.
6. How to invest in funds
Funds are baskets of individual investments that let you buy lots of little chunks of shares in companies. Sometimes, funds are managed by a professional investor, but many are simply managed by computers. They often track or mimic indexes, such as the FTSE 100 . Investment funds go up and down in value over time, and you may lose money. Ideally, aim to sell when the price is higher than when you bought them.
7. Buy individual stocks and shares
Another type of investment you can put in your stocks and shares ISA are individual shares of publicly listed companies. You should only buy these if you’re confident you know what you’re doing as they can be risky investments. Be very clear about how much risk you’re willing to take with your money. A share price can fluctuate wildly according to how the company is performing. If a company is doing well there’s potential to make a lot of money but, if it goes bust, you could lose everything: don’t put all your eggs in one basket.
Whether you have savings or a current account, check to see if your money is protected.