Investing your money intro
We tend to think of investing as being sophisticated, but it needn't be. Whether you place your money in a piggy bank, or in a multinational investment house, the aims of saving and investing are broadly the same - to provide for our expected future needs and perhaps a little extra for anything unexpected.
When you're planning your finances it's helpful to understand how savings might differ from investments.
We generally think of savings as money that we set aside and can access relatively quickly. These savings are often for a specific need or purchase, like a holiday or a new car or simply rainy day savings. The most common way of saving is into a bank account (also known as a deposit account) where you can access your money easily in an emergency, and for every £1 you put in you will get £1 back (short of a bank collapse!) and possibly some interest.
Investments are savings that you intend to hold for at least five years. Most investments are not guaranteed to return your money in full, although they do offer the prospect of higher returns than deposit accounts. Key factors that will determine a suitable place for your money are the investment returns you expect to get and the risks involved with holding those investments.
Top tips
- You should be comfortable with tying up your money for a period of time. Try to have sufficient savings in place for immediate needs so that you are not forced to sell your investments.
- You don't need a lump sum to start investing. Most people begin by putting aside small regular sums from their disposable income.