Beating Cash

Should I save, or should I invest? The first thing to clarify is the distinction between savings and investments.

Savings. These typically include money which you need quick access to, or money which is being set aside for a specific event or purchase, particularly in the shorter term, such as a deposit for a house or a wedding. Savings can be held in bank or building society accounts. In return for depositing your money into an account, you are paid interest on it. Unless the bank collapses, for every £1 you save, you are guaranteed to get at least £1 back.

Investments. These tend to be used for longer-term goals, and typically consist of money that people are able to commit to an investment vehicle for a period of at least 5 years. Investors generally expect to make a greater potential return on their money, due to the increased degree of risk they are taking, but most investments can’t guarantee to return your money in full. It’s a balance of risk versus reward.

Historically, longer-term investments are likely to be more effective in beating inflation than short-term savings, but this has to be weighed up against the fact that investments tend to carry greater risk.

So, which is best?

In short, a combination of investments and cash savings should cater for both short and long term needs. This will help balance the need for short-term access to your funds, whilst giving you the potential to make returns from longer term investments.

For further information regarding investments and savings, we strongly recommend that you get specialist financial advice. Why not speak to one of Legal & Generals’ Financial Advisers in a local Bradford & Bingley branch, where you can look in detail at the options and products available to you, based on your financial circumstances.