5 smart things to do with your money instead of keeping it in your bank
What are good alternatives to a bank savings account?
Times are tight, inflation is soaring, and the cost of living is at a record high, so it’s more important than ever for your money to be in the right place and not being eaten away by inflation in the wrong account.
In April inflation hit a 40-year high of 9%, up from 7% in March, and it’s predicted to continue rising this year.
It means prices of everything we buy has risen and certain household bills have shot up by much further than this amount. Energy bills, for example, rose 54% in April, and are expected to go up further in the autumn.
If you haven’t looked at your personal accounts in a while, it’s time to give them an assessment to make sure your money is in the right place for you.
You want to be earning as much interest as possible and making it work for you. Keeping it in your current account earning no interest is not doing you any favours, and it’ll be losing its value thanks to inflation.
Here we look at five alternative locations where you can set your money to work so it’ll start earning a return for you. Please remember you may not get back the full amount you put in. Your capital is at risk if you invest and easyMoney is not protected by the Financial Services Compensation Scheme (FSCS).
IFISA
One of the highest rates of interest available is by investing in an innovative finance ISA, or IFISA for short. For two years running the average return rate has been 9%, which far surpasses the rates on offer from any standard savings or cash ISA accounts. In fact, it’s one of the only routes to beat inflation too. The returns from money saved in an IFISA are also tax free, up to the yearly ISA allowance of £20,000.
Yet using an IFISA isn’t risk free, money kept in one of these accounts isn't yet covered by the Financial Services Compensation Scheme (FSCS).
While there are a number of safeguards you can put in place to mitigate this, it ultimately means if you put money into a company and it then goes into administration, you could lose it. Returns are also not guaranteed.
Try your hand on the stock market
If you aren’t already investing, and you’ve got money to spare, instead of leaving it in a current account it might be worth looking into investing.
It isn’t a decision to take lightly, as there is a lot more risk involved than keeping money with your bank, yet the returns are potentially a lot higher.
With any kind of investment, you need to look in the longer term (of at least five years usually). If you invest money for a shorter period than this, it usually won’t have had enough time to grow.
The options are endless so before you dive in, have a think about your own level of risk, what you’re happy with, and how much money you could potentially lose. Returns are potentially significantly higher, but they aren’t guaranteed.
Emergency savings pot
Before you put money anywhere, starting an emergency savings pot should be a priority. It’s for the unforeseen things you can’t predict, a broken boiler, your car failing its MOT or in the worst case losing your job.
This account needs to be accessible, so you’ll be looking at an easy-access savings account or ISA. If you are someone with an interest-paying current account, this could also be the place to keep this money.
You should aim to have between three and six months of your regular income in an emergency pot but anything you can put away will help.
Retirement planning
It might be a long way away, but pension planning should not be overlooked.
For your state pension, you can quickly find out how much you’re entitled to and when you can receive it, through the GOV.uk website. This can give you a good idea of how much extra you may need to save into a private pension to make sure you have enough to live off when you stop working.
If you’re employed, a workplace pension means your employer will also pay into your retirement pot, either by matching or beating your own contributions. Therefore, it’s well worth signing up (you should be automatically enrolled) to take advantage of this extra cash.
Regular saving account
Putting away money regularly, ideally monthly, is a good way to build up a savings pot over time. You have the flexibility of setting the amount you want to save and if you set up a direct debit for the payment it’ll automatically come out.
But putting money away isn’t enough, you want to be earning interest on it. Luckily there are some regular savers around with a decent rate of interest and you can find rates of up to 3.5% at the moment.
The downside of a regular saver, however, is that you can’t put all your money into one.
There are usually minimum and maximum limits on the amount you can put away each month. Some accounts also have limits on the amount of money you can withdraw without losing interest.
Invest now at easyMoney.com (Capital at Risk)
All the facts and figures presented are accurate at the time of posting.
easyMoney is not a cash savings account. You may not get back the full amount you put in. Your capital is at risk if you invest. Peer-to-peer investments are eligible for an Innovative Finance ISA which is not a Cash ISA. They are not protected by the Financial Services Compensation Scheme (FSCS). Money invested through easyMoney is concentrated i n property and could be affected by market conditions. For the same reason, instant access cannot be guaranteed. We do not offer investment or tax advice.
easyMoney is the trading name of E-money Capital Ltd, a company incorporated in England & Wales. Registered office is 5 Fleet Place, London, England, EC4M 7RD (Company No. 04861007). E-money Capital Ltd is authorised and regulated by the Financial Conduct Authority (FCA) #231680.