In today’s economic climate, most individuals are significantly more budget-minded than ever. Owing to the recent economic slump and the gradual, unpredictable recovery, many people now give thoughtful consideration to every purchase. This helps to lighten the burden on our personal finances, easing monthly outgoings, and – with hope – leaving a noticeable sum leftover at the end of each month. Yet, the question arises – what to do with the money we save? Let’s explore some of the best practices to maximize your savings.
Where to invest and save
Depositing your money into a savings account is a long-standing, reliable, and prevalent method of saving. Its main selling point is that it avoids financial risk. However, the downside to savings accounts is the scant interest rates they currently offer. Looking at historical interest rates, one might find oneself surprised – or even a bit disheartened – by the considerably higher interest rates of the past. From a consumer’s perspective, there doesn’t appear to be much variety in today’s interest rates, as they all seem to hover around the same levels.
However, it’s worth noting that savings accounts are extremely secure, far safer than stashing cash under the mattress. In most instances, your deposits should be insured up to a certain limit. The unfavorable side, of course, is the low interest rate. But that doesn’t entirely invalidate this savings technique – the caveat is that if it doesn’t keep pace with inflation, your money’s real value doesn’t remain intact. This might be a minor percentage, but imagine your deposit’s value decreasing slightly over time. It’s not a pleasant thought, which is why many people explore alternate options.
So what are your alternatives if you want your money to work harder? One such choice is peer-to-peer lending, which eliminates intermediaries and allows for direct transactions over the internet. Offering higher returns than traditional savings accounts, this can be a feasible option for those aware of potential risks – such as the lack of assurities that banks commonly provide.
In the current times, investing might be the real key to making your money work. However, if you’re stepping into the world of investing yourself, be prepared for a significant amount of research as it’s not as simple as just investing your money. There are many sources for investment advice and not all options require expert knowledge. For instance, tracker funds, which follow an index (though not always precisely) and hopefully escalate in value over time.
Strategies for Saving Money
After deciding on your savings plan, the next step is to enhance your investment value. Here are a few suggestions that can get you started:
Reduce your debts. Focus on paying off debts before starting to save. Consider different strategies for debt reduction – for instance, the stack method allows you to pay off loans starting from highest interest rate.
Lower your utility costs. The obvious action here is to decrease energy consumption. There are entire websites offering advice on this topic. In addition, compare providers for the best deal.
Prepare for unexpected costs. A healthy savings account can be crucial in this regard. For instance, if you were to get sick, your income could be affected. Recent research indicates that 33% of people diagnosed with cancer have to stop working, either temporarily during treatment or permanently. According to ABI, the average payout for critical illness claims in the UK is £60,400 (or $91,900). Thus, having appropriate insurance – be it for your home or health – is worth considering.
In conclusion,
Reducing expenditure leads to savings, and wisely invested savings can accumulate wealth. By diligently seeking out the most efficient ways to trim down expenses and save money, you should hopefully find yourself on a trajectory towards financial stability.
