5 ways to kick-start your savings and investments

An image of a hand with the Queen's face projected upon it to depict the idea of savings and investments.

Investing

Gareth Trainor

20th January 2014 at 5:35pm

The beginning of a new year is a great time for reflection.  It’s a chance to put plans in place to ensure we’re in shape and on track for the year(s) ahead. Whilst we traditionally step-up on the scales, we should also be taking time to step back and focus on our finances – they can benefit from some scrutiny just as much as our waistlines.

Here’s 5 simple and quick tips to start getting your finances in shape.

1) It’s all in the planning

Saving and investing is easier if you have a plan. It’s simple to produce and all you really need to get started is ask yourself a few key questions.

  • What’s your saving goal?

  • How much would I need to achieve my goals?

  • How much will I have?

Have a read of Julie Russell’s blog with some great practical guidance on how to create a plan.

2) Shore up for the short term

If you’ve got a short term goal in mind then there’s some options out there which will give you tax breaks and easy access to your cash when you need it.  If you’re saving for less than five years, there’s less time to recoup any losses so think about bank accounts or a cash ISA.

But if you’re investing for the longer term, you’ve an opportunity to choose investments (rather than cash) for greater potential returns as you’re more able to ride out market ups and downs.

A Stocks and Shares ISA could play a role here.

 3) From small acorns

The earlier you can start investing, the sooner you’re likely to reach your goal. This might seem an obvious statement, but in the world of investment it really rings true. The first year you invest you can only earn a return on the original investment.

But the next year, you can earn a return not just on the original investment but also on the return you earned in the first year. So the return in one year can generate return on itself the next.  And so it carries on with a snowball effect that compounds year on year.

As a result your money can grow faster and faster as the years go on, so the earlier you start the better.

4) Play the long game

Everybody’s different.

There are many investments to choose from so it’s important to find what suits you best.  This will depend on how hands-on you are, how much risk you want to take, and how long you can invest for.

There are many investments to choose from so it’s important to find what suits you best.  This will depend on how hands-on you are, how much risk you want to take, and how long you can invest for.

If you’re investing for the longer term, you’ve an opportunity to choose less risk-averse investments, like company shares or equities, for greater potential returns as you’re more able to ride out market ups and downs.

It’s important to remember investment values may go up and down and you may get back less than you paid in.  So at times of market dips it can be tempting to cut your losses, but often it’s worth just sticking with it as history tells us that markets do recover over time.

So if you can, stay the course and ride out the storms.  And if you’re approaching a time when you do need to take money out, that’s a good time to consider switching to more stable investments.

5) Boss your finances

Investing in company shares, or equities, means you effectively own part of a company, entitling you to a share of the company’s profits, both now and in the future. Over the long term, equities have outperformed many other types of investment and investing in equities can help protect you from inflation.

This is because company profits tend to move in line with the cost of living over the long term.

You don’t have to invest in individual shares, however.  You can take a less risky approach by looking into investment funds, which invest in a broad range of companies, rather than just one.

Hopefully these tips will help you to start flexing those finances, putting some muscle behind your money – all you need is a little time and effort. If you’re looking for further guidance on saving and investing, there’s a number of independent sites available to look at, such as The Money Advice Service, Which and The HMRC.

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The information in this blog is not financial advice.  A Stocks and Shares ISA is an investment.  Its value can go up or down and may be worth less than you paid in.