Introduction to Savings & Investments

Why save?

Often, people save for a specific reason and it's usually the safest way to build up a pot of money.

It’s less risky than investing, but it offers limited growth. The most you'll earn on the money you save is the interest added. Saving is perfect for people who don’t want to take any risks with their money, and most savings accounts have easy access or are for a fixed term.

However, you should also consider the effect of inflation on your savings. If the rate of inflation is greater than the rate of interest being earned, your savings are effectively losing value over time. Also, you should ensure that the savings account chosen is covered by the Financial Services Compensation Scheme (which will compensate you if the institution that holds your savings fails and can’t pay back your money) and that the amount saved is no more than the limit payable under this scheme.

There are many different ways to save, but whichever way you choose, the general idea is the same: to build up some money - savings - that can be used, for example, to make a large purchase such as a new fridge, go on holiday, pay for school fees or cover the cost of expensive times like Christmas.

Savings also provide security by making sure that some money is put aside for emergencies or unexpected costs.

Where can I put my money?

There are a number of different types of savings products out there. The links in this section will provide a guide to what is available to you.

What's the difference between saving and investing?

Saving is a stage on the way to investing.

You cannot be an investor without being a saver - but you can be a saver without being an investor.

When someone talks about savings and saving money, it could be referring to a piggy bank on the mantelpiece or a high interest deposit account. Savings are effectively cash or cash instruments, such as deposit accounts, term bonds etc.

Investing is what you can do with the savings you have created - if you are looking to generate a return on your money that is greater than what is already available to you through your savings instruments.

As a saver, you will be taking very few and very small risks with your money.

As an investor you are taking a much greater risk. Not only is the return on offer to you likely not to be fixed or guaranteed, the capital sum you invest may be at risk as well.

So why would anyone want to take such risks? The short answer, of course, is because the potential rewards may be greater and you want to generate more from your money than is possible by simply leaving it in a bank or building society deposit account.

What should I do now?

Since there are so many different types of savings and investments, and there are potential risks with investments in particular, it is wise to seek expert advice which can be tailored to suit your own circumstances.