You work hard to earn your income, and so it’s entirely natural that you should expect your savings also to work hard for you. Fortunately, there are five easy ways to ensure your savings retain their value, and bring you additional income over time as well. Let’s consider them now, in no particular order.
Top tip number one: Take advantage of Cash ISAs
The tax-free nature of ISAs makes them an invaluable part of any financial portfolio. Since the individual limit for ISA was lifted to £20,000 in April 2017, their importance has increased. It can be tricky to work out which one to choose. Key criteria include not only the rate being offered, but also the access terms, and online/offline versions. For short-term investments, cash ISAs can be really hard to beat.
Tip two: Stocks and shares through the ISA system
For medium-term investments, a stocks and shares ISA can be a better option. Here, too, there are many different providers, and you need to do your research to locate the best returns. It is important to have expert advice, and accurately match your appetite for risk with the prevailing market conditions.
Tip number three: Inflation-linked bonds
Everybody knows that government bonds are generally a safe option, but their returns tend to be low. In times of rising inflation, they can seriously underperform. That’s why inflation-linked bonds can be a sensible choice for at least part of your savings. A note of caution should be sounded, however, because as the Financial Times recently pointed out, the Bank of England’s Monetary Policy Committee can raise or lower interest rates, with consequent impact on bond returns. These are turbulent times in the financial world, with many variables, and so it is difficult to predict what the future holds.
Tip number four: Try peer-to-peer and other innovative investment types
There has been a the lot of buzz recently around potentially bigger returns from peer-to-peer lending. These companies do seem to be quietly revolutionising the savings market, but there is one drawback: they are not fully covered by the FSA. There still might be a place for them in your plans, and they are certainly a trend that is worth keeping an eye on.
Finally, tip number five: have a sensible spread of investments
The old adage that you shouldn’t put all your eggs in one basket is still true. In fact, with all the ISAs and other products available, it is easier than ever to make sure that you have a sensible balance across your whole savings portfolio. It’s always good to have some expert advice on your side. Ideally, you should review your investments at least once a year, and preferably more often. Whenever the markets change, there is usually something you can tweak to enhance your return.