A savings pot is just that unless you turn it into a growing one that yields high returns after some time. Saving and investment are different but related concepts in personal finance that you should use concurrently. Let’s explore options on how investing can really help boost your savings pot.
Open a Regular Savings Account
These accounts pay as much as six percent interest on saved amounts per annum. So, instead of keeping your savings in cash form or in accounts that do not earn interest, opt for savings accounts because your money will not be the same a year from the date you deposit it. One desirable aspect is that you do not have to make a lump sum deposit to earn considerably from this account type since periodic deposits that are made monthly can also make a big difference. Ensure to check the terms that come with whatever savings account you pick because you could be penalized for making withdrawals or failing to make deposits.
Due to the introduction of this amazing trading option, it is easy to boost your savings pot without being physically present to transact. The reason is that an online broker such as CMC markets will handle your trading instructions while you carry on with other daily undertakings. If you have a savings goal in place, it is possible to meet it in a short period if you invest in online trading because the entry requirements are minimal. Besides, you can top up your trading amounts every month from your earnings or other savings. Your savings pot will grow in ways like dividends, capital growth and speculation.
Fixed Interest Accounts
These account types pay interest on deposits just like regular savings accounts, only higher. In most cases, interest rates are double digit, which is commendable because you will reap greatly at the end of the agreed term. Some of the merits that make fixed interest securities appropriate in growing your savings pot include:
- The savings habit is encouraged because you can keep your cash in an account for a particular period without making withdrawals
- The returns are guaranteed
- The amounts in your account can be used as security to borrow funds in case you encounter an emergency situation
- In some instances, you can make premature withdrawals, which offers flexibility in case you wish to opt out of the savings plan.
Fixed Interest Securities
The amounts in your savings pot can grow to considerable extents if you invest them in these instruments. Common examples include preference shares, bonds, gilt-edged bonds and debentures. When you buy such securities in a specific firm, you become their lender, which is a position that entitles you to receive interest payments as per the agreement in place. Unlike equities like shares, these instruments carry less risk, meaning that the chances of losing your investment are close to nil. The only aspect that threatens their returns is interest-rate risk since their earnings are fixed over the term of the instruments and could be less valuable as such rates increase.
Placing your funds in a unit trust is also desirable since this is a fund that is made up of investors’ cash that is invested in a multitude of financial assets. In short, your savings amounts are pooled with that of thousands or millions of other investors’ cash to create a fund that is overseen by a fund manager. Top among the benefits of these vehicles include:
- Fund managers are experienced and trained professionals with the resources and skills needed to make investment decisions
- Your money is invested in numerous asset classes and types, which reduces the risks of losing it
- You get to invest in lucrative markets that you may not have in the past due to financial constraints
- It is possible to make monthly investments into the fund that involve tiny, affordable amounts
Money Market Funds
These are short-type investment vehicles that are perfect for enhancing the value of your savings pot. They are investments that are created for the purpose of earning interest income for shareholders in periods that are usually less than one year. It is possible to purchase shares in such funds via banks, mutual funds and brokerage firms. In addition to low risks, money market funds also offer high liquidity and you will not be charged for entering or exiting.