Savings and Investments
You may have thought about setting up a savings plan or taking
out an ISA before but never quite got around to it. Although there
are always more 'fun' things to spend your hard earned cash on, it
is wise to make sure that you have some savings to cover you in an
emergency or to begin to save for a property.
The easiest way to save is to pay some money into a savings
account every month. It's worth setting up a standing order if you
can, so the money goes straight from your bank account without you
having to do anything.
Your savings goals
You need to set savings goals to give you an idea of how much
and long you need to save for. If your savings goal is more than
five years away, putting some of your cash into investments could
allow you to earn more from your money and keep up with rising
prices. You may think that you don't want to 'gamble' with your
savings but the truth is there's no such thing as a 'no-risk'
Savings and risk
You're always taking on some risk when you invest, but the
amount varies between different types of investment. When you start
investing, it's usually a good idea to spread your risk by putting
your money into a number of different products and asset classes.
That way, if one investment doesn't work out as you hope, you've
still got your others to fall back on.
You need to make sure you have enough saved to deal with a
sudden expense - for example, a broken washing machine or
boiler - but there's such a thing as too much emergency cash.
It's best to split your savings, keep some to hand for
emergencies and put the rest where it can work harder for you.
You want to be able to pay for an unexpected
repair, but it's also important to have enough money for a few
months in a sticky situation. Say, you lost your job or split up
with your partner, and needed some time to get back on your feet -
you'll want a bit more than the cost of a new boiler or washing
machine. If money's short, start small. For example, saving just £3
a day adds up to £1,095 over a year.
A good rule of thumb is to have three months
essential outgoings available in an instant access savings account.
So, if you spend £1,000 a month on mortgage or rent, food, heating
bills and other things you can't live without, you should aim for
£3,000 in emergency savings.