There are many
options available for saving and investing
money. For example;
you can receive
interest on your savings in a building
society
you will usually
get dividend payments from owning
shares
you can choose
an investment fund designed to produce
regular income.
You can produce
an income from your savings and investments
by investing a lump sum. You can also
invest a regular amount of money when
you have some surplus cash. If you invest
a lump sum then you can make a single
investment and also combine it with
additional amounts whenever you want.
It is important
to recognise that saving and investing
usuallly involves some
sort of risk.
In the 1930s a lot of people lost
money when several major banks
collapsed.
Banks use money
from savers to invest in stocks and
shares, Government Gilts, money markets
and corporate bonds. If the bank invests
it well then the bank makes money. If
they do badly the bank can lose money.
If everyone who
has money in a bank asks for it at once
then the bank will not have enough money
to pay everyone! This is what happened
in the 1930s to a bank in Germany, and
then to other banks across the world.
The same thing has almost happened recently
to banks in Japan, Germany and America.
Saving and investing
involves varying degrees of risk. If
you want to save money in a bank/building
society, you will be taking almost no
risks with your money. If you want an
income, then the potential income you
can receive will normally be linked
to the risk you are prepared to take
with your money.
Generally speaking, the higher the potential
returns from an investment, the greater
the risk of losing some or all of the
money you have invested.
The table
below shows some examples of the degree
of risk.
Need help or advice? A financial adviser can give
you help and advice. To find an independent
financial adviser in your area you can
contact:
They will send
you details of three independent financial
advisers in your area.
Some
of the questions a financial adviser
may ask you include:
Have you planned
for retirement? Do you want to increase
the amount a pension would pay when
you retire?
Have
you any debts? Is the amount you are
paying in interest on a debt more
than investing the money would earn
for you?
Do you want
to invest in property? If you live
in a council property do you have
the right to buy (your local council
housing department can provide the
information)? If
you have a mortgage do you want to
pay some off?
Are you getting
any benefits that may be affected.
Do you have
an emergency fund fund for unexpected
expenses?
If you decide
you want to save or invest then you
will be asked to consider:
how much to
invest?
whether
to invest in one or several things?
what you want
to invest in? – there are lots
of issues here. It is a balance between
risk and payoff. Some companies offer
ethical investment opportunities if
this is important to you.
A
financial adviser will be able
to help you consider these points.
Easy access
to your money If you just want somewhere
to keep your money where you can get
to it then you may want to think about
whether you want a:
Tax
on savings - Interest on
savings is usually taxed if you pay
income tax. Non-tax payers can claim
payment of interest without tax deducted.
Contact the HM Revenue & Customs or your
building society for a form if this
applies to you.
Means-tested
benefits - If you are claiming
these, then you must declare your
savings.
Child
Trust Fund - The Child
Trust Fund is a savings and
investment account
that became available in April
2005. The Government is making
payments to help build up savings
for children.
Until the child turns 18 the
money
that
is in the Child Trust Fund cannot
be accessed.
Your children
will benefit from the Child Trust
Fund if they:
are born
after the 1st of September 2002
and
qualify
for Child Benefit and
if they
are living in the UK.
All eligible
children will receive an initial
basic
payment
into their accounts and children
from lower-income families receive
an extra payment. Additionally,
family and friends can contribute
to the fund. Interest that
might be earned with the Fund
is tax-free.
To find out
about:
how much money
the government will contribute to
your child’s fund
how much money
you will be allowed to contribute
per year
