For what seems like a long time, there has been a debate around whether people should save or invest their money. With bank interest rates at an all-time low and more people choosing other options rather than saving, this debate is something that is particularly strong and talked about right now. Despite what you typically do with your money, it may be worth looking into different investment options and what would benefit you, your finances and your lifestyle.
Below are some tips on whether you should consider investing or saving your money and both the pros and cons of doing so. In the current political and economic climate, it is essential that you consider all of these options with an open mind before deciding what is best for you.
Investing – Pros and Cons
There are various ways you can invest your money. The likes of stocks and shares don't take a lot of money to deposit into, which is why it's more accessible to the average person (as long as you're educated about the subject). However, property investment is something that requires a lot more money, but there are fewer risks involved since property has always been considered a stable and secure investment option.
Property investment provides any investor with high returns through capital appreciation and rental payments (that many companies will have assured periods of). If you're able to find the best places to invest, then you're sure to see a return within no time at all. RWinvest recommends looking towards the Northern city centres to get the best yields and return on your investment. Cities such as Liverpool, Sheffield, Newcastle and Manchester are all favourites. If you're someone who has a large amount of cash upfront, investing in property will give you the best rates of return. Make sure you do your research though, the key to successful property investment is to have a plethora of knowledge of the subject before taking the plunge and handing over your money.
Pros of Investing in Property
- It’s considered a stable and secure investment with little or no risk involved.
- The returns are high as long as you’ve done your prior research and invest in high-yielding areas.
- A property is an asset which means it will only gain value over time, unlike money sitting in a bank account, you’re accruing value on your property every second of every day.
Cons of Investing in Property
- Often you will need a sum of money to invest.
- Investment strategies such as hands-on investment don’t work for everyone and their lifestyle.
Saving – Pros and Cons
Saving is completely the other end of the spectrum; as someone who wants to save, you have multiple options on where you can save this money. The most profitable place to put your money is arguably in a Lifetime ISA, as by doing so, you've not got the added risk of other ISA's but you still get a tax free interest on your savings. The Lifetime ISA allows an individual from the age of 18 to 50 to save £4,000 every tax year and get 25% on top of this (£1,000 a year). Not only does this mean you can have a place to store your money, but you're also getting a sum back too. Unlike typical bank savings accounts, you're getting a much better interest rate, and your money is secure within an account. If you were to save for the maximum number of years, you could earn £33,000 in free interest!
However, you have to think of the negatives too. There is no extra interest if you have a lump sum of money to deposit into the account (you can only earn interest on £4,000 every tax year!) and this seems like a waste of money if you’ve got upwards of £30,000. This is why investing may be a better option for anyone out there with significant sums of cash.
Pros of Saving in a Lifetime ISA
- You earn £1,000 for every £4,000 you put into the account during the tax year for up to 33 years (or until you’re 50)
- Your money is safe and secure.
- You don’t have to have a large upfront sum of money.
Cons of Saving in a Lifetime ISA
- The money can only be withdrawn for two things: your first home or retirement. If you choose to withdraw before then, you face penalty charges.
- You only get a limited amount of money as interest.
- You must be over 18 but under 40 to open a lifetime ISA and you only get the bonus interest until you’re 50.