Most of the time the term savings and investments are used interconnectedly. However, they mean different things and if you want any spare money you have to work hard for you, it is important to understand the difference.
Savings are generally the money set aside for a rainy day or a specific item. The emergency pot for a new boiler, car or a holiday and generally needs for the short term between 1 to 3 years. The money saved will be put in a deposit account with instant access for short notice period, so is easy to get to. It is possible to fix the access period for between 1 to 5 years for a bit more interest. The trade-off for accessibility will be interest. Interest rates are very low at the moment. Since 2008, they have been extremely low, around 1% for instant access if you are lucky. At the moment the interest is not even reaching the level of inflation which is 1.5% (RPI).
Investing means putting money, time, or effort into something with the aim of making a profit. This could be investing in property, stock market, pension funds or businesses where you cannot be guaranteed what you will be get back but the trade-off here is hopefully much better return than the savings accounts can offer.
It is easy to understand if you have not invested before, it can be daunting – where would you start in making these decisions? Research is vital and educating yourself in all aspects of the investment you are interested in. Do not invest in anything if you do not understand the benefits and drawbacks, the costs, and the mechanics of how it works.
As regulated financial advisers; we have spent years working with and advising on investments through various economic cycles. If you do not have the time or inclination to learn to yourself, or you prefer to work with specialists that can help you on the journey to achieving your financial goals, you will undoubtedly find that you would be better off for it compared with putting your money into a bank account, over the long term.
Please remember that unit prices and the value of your investments can fall as well as rise and there is no guarantee you will receive a return of your original investment, especially in the early years or where you choose to take an income from it. Past performance is no guarantee of future returns.
Tarvos Wealth is authorised and regulated by the Financial Conduct Authority