I make more in a week than you do in a year
Updated: May 4
WTF is this blog about!?
If you read my last blog, you'll know that inflation is like Pac-Man; guzzling up the value of your money.
You can overcome this for short term savings (i.e. money that you'll need within the next 5 years) by moving your cash to accounts that pay higher interest rates.
But what about longer term savings?
What are longer term savings?
These are #moneygoals that are typically at least 5 years away. For me, that's buying a house (it's unlikely I'll be able to afford a place in London in less than 5-years and I don't see myself moving to the suburbs anytime soon). This relatively long time horizon means that I can afford to lock my money up; so it makes sense for me to invest my savings to earn a higher return than what I could get in a savings account or Cash ISA.
How TF do I invest my money!?
IMO, the easiest way to invest your money is through a Stocks & Shares ISA (woohoo, tax-free!) with a robo-advisor (basically an app that invests your money for you, so you can leave the hard work to the experts!). To do this, all you need to know is:
1. How much money you can afford to invest
When you invest your money, although it's expected to go up over the long-term (i.e. 5+ years), in the short term, it's at risk of fluctuating in value. So you want to make sure that you can afford to ride out any storms (such as the #coronacrisis!).
What I mean by this is, don't invest any money that you might need to withdraw with short notice, because you don't want to sell your investments when the markets are down (i.e. now!). This is why I wouldn't recommend investing any money unless you have an emergency fund available as a back-up in case we experience another stock market crash.
2. How long can you afford to invest it
The further away your #moneygoal, the greater the risk you can afford to take (in general, the greater the risk, the higher the potential gains). For example, I can invest in riskier stuff (i.e. more equities) for my pension than my house deposit fund (because I won't be cashing out my pension for like 40 years, so that's enough time to ride out most potential market crashes).
How can I set-up a Stocks & Shares ISA?
For my house deposit fund I've set-up a low(ish)-risk (Level 4) Stocks & Shares ISA with Nutmeg* (note that I previously had a Stocks & Shares ISA with Aviva, but their website was something from the Stone Age and I had to call every time I wanted to withdraw money, so I moved to Nutmeg, who are a hell of a lot more user-friendly, have an app, and offer ready-made portfolios. However, since the market has just crashed, I didn't want to move my existing savings to Nutmeg because it would involve selling my investments for less than what I bought them for (i.e. my savings have lost value), so I've kept it with Aviva for now and will transfer it once the markets pick-up again!).
It literally takes minutes to set-up a Stocks & Shares ISA and most robo-advisors will offer a short questionnaire to help you choose the right risk level for your #moneygoal and allow you to deposit a set amount per month.
In my Nutmeg pot, I've made £3 in one week. I know this doesn't sound like a lot, but it's 60 times what I would have made if I had kept this money in my current account for a whole year!
But won't I loose my money if I invest it?
As with all investments, your money is at risk of going up and down - for example, my ISA has now fallen £1 in value since the photo above. But historically, over the long-term, markets have always gone up (see chart below), so it's worth the risk if you don't need the money anytime soon.
Investing can help you earn a lot more money on your savings than a bank account - so if you have any #moneygoals that are over 5(ish) years away, then it's worth looking into. I personally find Stocks & Shares ISAs with robo-advisors (i.e. Nutmeg*) the easiest way of investing, since the experts will choose what to invest in for you, based on your chosen level of risk.
If you want to find out more about ISAs, you can download A Millennial's Guide to ISAs for FREE by subscribing to my mailing list.
*By using this link to open a Nutmeg ISA you won't have to pay management fees for 6-months (I'll also get a small reward, so it's a win-win!).