All of us want the best for our families. We want our loved ones to be healthy, happy, and able to live the lives that they dream of, particularly our children. For many people, this is a driving force for working hard, and any pennies that make it into a savings account are put away ‘for a rainy day’.
But have you considered what actually happens to this money when you add it to your account? For example, where it’s invested, how much interest it earns, and if it’s a safe investment. Whilst it’s true that cash savings accounts can give you the greatest degree of flexibility, allowing you access to your money quickly, they might not be the best choice for you and your family when it comes to seeing long-term returns on your investment.
Choosing the right investment is a personal choice that each individual should carefully consider. In this post, we share useful information on key investment products to help you identify the right one for you.
ISAs and JISAs
Perhaps the most simple way to invest is by taking out an Individual Savings Account, more commonly known as an ISA. Having a fixed rate ISA or fixed rate ISAs means that the interest rate on your savings will remain constant for a certain period of time, usually between 1-5 years. This makes it easier to plan and budget for your investments, as you know exactly how much return you can expect.
Fixed rate ISAs are great for those who want low-risk investments, as they offer consistent returns without any surprises. They are also tax-free up to a certain limit, so you won’t have to worry about paying taxes on your earnings. However, keep in mind that once the fixed term is over, your ISA will typically convert into a variable rate account and the interest rates may change.
ISAs allow you to save £20,000 tax free (correct as of the 24/25 tax year), which can be a fantastic benefit in comparison to simply opening a second current account. Many banks offer flexible ISAs, which allow you to take money in and out of your account without reducing your yearly allowance.
Junior ISAs
Depending on your financial situation, you may also want to consider opening a Junior ISA (JISA). This allows you to get a further £9,000 tax free allowance per year for children who are under 18. However, in this case, the money belongs to your child, although they can only withdraw the cash once they turn 18. This can be a great opportunity for parents if they want to save specifically for their child rather than having a general savings pot.
Precious metals
The idea of investing in gold and silver can feel a bit out of touch to most of us. It’s something we associate with big banks or millionaires. However, historically, gold, in particular, has been an excellent hedge against inflation, making it a worthwhile investment for many people.
You can easily purchase gold bullion or coins online, take shares in gold-based funds, or invest directly in mining companies. If you opt for the latter, make sure to do your research to ensure the company and the gold comply with socially responsible mining standards.
Fixed-rate bonds
A fixed-rate bond is an account where you commit to locking away your money for a certain period of time, and they guarantee you a fixed rate of interest in return. In most cases, you only pay in just once at the start of the term, so they can be a good choice if you have a lump sum and you want to grow rather than have it as part of your financial pot for emergencies.
Typically, these bonds are set up for 1,2,3 or 5 years, so it’s not as long of a commitment as you might think. At the end of the term, you can either take the cash, or reinvest it for another term. Perhaps one of the best things about these types of investments is that you know just how much money you’re getting back at the end, which can aid your financial planning.
Create the future you want
There you have it. Three ways to make the most of your hard-earned money and increase your return on investment. As with all financial planning, make sure to speak to an expert if you’re not sure what is right for you, and always keep an emergency fund that you can access if you need it.
Disclaimer: I am not a financial advisor. Always seek professional financial advice.
