Hey Skint pals,
‘I prefer to keep my money right where I can see it – in my closet.’
What messages does your mind give you when you think about investing? Are you all Richard Branson about it – yep, bring it on, give me more, do it now? Or are you more Carrie Bradshaw, who when asked about investing in property came out with the quote, above?
Me? I’m veering into Richard’s camp now. I’ve spoken before about how I’ve been a financial ostrich in the past but it isn’t something I’m proud of and neither should Ms Bradshaw be. These days, things are quite different.
I’ve got some savings now, not much but something, and ISAs, and all the stuff we ought to have, but lately I’ve been thinking about making the next step – into investments rather than just savings. I’m not talking big money by any means – it’s small beans really. But I’ve got to start somewhere and, I’m questioning the wisdom of having money lying idle in a savings account, on low interest rates, and I’m thinking about investing it. So, how to invest money, starting from zero?
Lump sum conundrum
Knowing what to do with savings is something that comes naturally to many, but not to me. I’m naturally quite risk-averse, so I’m not sure that investing in the stock market is the way forward – especially in the current climate where the markets are so volatile.
When I left my previous employer though, after paying into a stakeholder pension for many years, I had the choice of whether to leave the money in the pension or take it and invest it elsewhere. So far, I’ve left the money where it is but I really don’t know if it’s getting me the best deal. This is my current conundrum.
Stakeholder pensions are seen as good for making a small lump sum grow, and are pretty easy to understand, but would I be better off looking at high-interest savings accounts? Although it can be hard to find one that offers significant returns in the short to medium-term, some still have pretty attractive rates – even in these tough times – if I’m willing to lock cash away for the longer term.
Pensions or ISAs?
For some people, pensions are not the best way of building a portfolio – where, for example, their work pattern is erratic. Here, cash ISAs may be a better bet, being either tax-free or tax-efficient, which help to protect your savings from dwindling due to levies.
According to the folks at Yorkshire Building Society, who are providing some of the information for today’s post, benefits include:
– No tax to pay on your interest. (Within a certain yearly limit)
– You can open an ISA for as little as £10
– Withdrawals do not penalize the amount of interest you earn.
– Instant ISAs allow access to your funds immediately, although this is not the case with many ISA’s.
But as I’ve got a bigger lump sum currently invested in the stakeholder pension and don’t care about instant access, am I better to wait it out there? Have you guys got any experience of taking money out of a pension? How are you investing for the days ahead, when walking frames will matter more than fashion footwear? I’d really love some advice on this one.