When it comes to deciding what to do with your money, it can be tricky to know where to start. There are typically two options available: saving or investing. There are plenty of benefits that both of these offer, and it’s important that you spend some time thinking about what’s best for you before you take the plunge.
To help you decide, here’s a look at what’s available and the steps you can take to funnel your finances.
Low-risk vs high-risk
A key starting point when you’re looking at where to place your pot of money is assessing the risks. What would happen if you chose one route over another?
Savings accounts and bonds are generally considered low-risk financial strategies. This is because you keep the money you put in, and there’s scope to make a return through interest – although how much more you make in interest depends on the current interest rates and where you put your money.
Investments can be riskier, although the level of risk depends on how you invest. For instance, using your money to buy shares on the stock market is probably a more aggressive approach than investing in more volatile markets like cryptocurrency.
Consider your personal circumstances
As well as the monetary risk, there’s also a personal one too. What’s happening with you right now? Are you saving for a deposit on a house? Maybe you’re trying to save for a decent family car. If you’ve got plans for your money, this is likely to be a deciding factor in how you invest your cash.
Creating a pot of savings can set aside an emergency fund should something go wrong. Plus, learning to save can be good for your financial well-being.
On the other hand, while there’s a risk of losing your money if you place it in investments, the return, should you become savvy at playing the markets, it can be hugely beneficial both in terms of expanding your wealth and in giving you new skills. As long as you’re aware of losing the money you put in, this could be an option that works for you.
Don’t take too many risks
Which leads to this final point. You know how much money you have to begin with. What you do with it will depend on whether you’re prepared to lose some or all of it.
Placing some or all of it in savings with a reputable bank or building society means that you’ll keep the money you put in. If you place some in investments, there’s a chance you could see a chunk of your total pot of money go for good.
Saving vs investing: what’s best for you?