How To Make Your Savings Grow Through Investing

You may have noticed that interest rates are pretty low at the moment. So any hard-earned cash you have is earning little to no interest, and you’re not able to make your savings grow this year. The latest figures show that inflation (the cost of living) is 0.7% so if interest on your money is less than that then it’s losing value. But a solution to that is investing!

Recent research from Nutmeg shows that 43% of 25-34 year olds feel financially better off than they did a year ago. This isn’t surprising as last year we’d just been in a long lockdown. So if you’re feeling financially better off now is time to make your savings grow and give investing a go. Investment firm Wealthify claim that 84% of young people say that they lack confidence and aren’t sure where to start which is why I want to break it down for you.

How you can make your savings grow by investing

Money in your cash or savings account is doing very little, but investing can help you beat inflation but also have more money towards whatever you’re saving for. For example if you put £50 per month into a standard savings account, in 10 years time you’ll have saved £6,000 and earned £151.22 of interest assuming a 0.5% interest rate.

But if you invested the same amount over the same time period you’d get £2,654.24 in interest assuming a rate of 7%. Even at the lower end of just 5% interest you’ll have made £1,764.11.

Investing does come with it’s risks, and money can do down as well as going up depending on the market. But if you’re able to lock your money away for a longer term then the general trend is upwards.

Investing with robots aka robo-advisors

If you don’t know the first thing about investing and don’t want the risk doing something wrong you can get started with robo-advisors. These are digital providers that will ask you questions about your attitude to risk and then suggest funds for you to invest in. Once you’ve chosen a fund your provider will manage the money and invest for you. So this can be a great way to dip your toe into investing when you don’t feel like you have much knowledge.

You don’t need a lot of money to get started as a lot of them start with £1. The robo-advisors are digital platforms that rely on algorithm-driven investment services.

I started off investing with a Moneybox Stocks & Shares ISA where I invested my spare change through roundups. But I see a lot of great feedback on both Plum and Wealthify

Some robo-advisers include:

• Moneybox – start with your loose change. It rounds up your spending and automatically shifts money into investments for you.
• Plum– Start with just £1.
• Wealthify – start with just £1.
• Nutmeg – minimum is £500 if you have the spare cash.

Use your ISA allowance to make your savings grow

I love ISA’s and think everyone should make the most of their £20,000 a tax year annual tax free limit. And you can open a Stocks & Shares ISA to combine both investing with your ISA. Most providers have an ISA option when you sign up, so if you haven’t opened an ISA that tax year make the most of it.

Investing for yourself

If you feel comfortable you can pick your own funds, or even individual shares. There are some DIY platforms such as Vanguard, Fidelity, AJ Bell, Interactive Investor or Hargreaves Lansdown. Although I can’t vouch for them as I haven’t used any of them. These companies have a lot of information to help you choose where to invest. But if you go down this route make sure you do your homework before making a fund decision.

Alongside my Stocks & Shares ISA I buy individual shares through Freetrade. I buy shares just because I like the companies and not through any strategy at all. This is why I only invest a little bit of money, and it’s money I can afford to lose. Although I’d rather not! I’m doing this for the long term to see how it goes.

If you sign up to Freetrade and deposit £1 using my link here we’ll both get a free share. And who knows what that might be.

Tips on investing to make your savings grow

Start small and start now

Don’t keep putting off investing because you think you need thousands. There are loads of apps and investment platforms where you can start with just £1. Start with small amounts until you feel comfortable and build confidence in investing. Then over time you can increase the amount you invest.

Invest regularly to make your savings grow

Once you’ve started investing make it regular to maximise the growth of your savings. As investing works on compound interest (interest on interest) the more you save, and the longer it’s set aside for the more you’ll make in the long term. Work out an amount that you can comfortably save and invest each month and automate it. Set up a direct debit to come out just after payday and build it into your monthly budget.

Investing regularly means you’ll be taking advantage of market dips and highs. If you only invest one month of every year and that month is when the market is at a high you may not make as much money as you bought high. But if you invest regularly you’ll get the dips as well so you can make your savings grow as much as possible.

Give your money time to grow

You can’t expect to make your savings grow overnight. Investments take time to grow, and the longer you leave it the more it will grow. Generally people see returns in 3-5 years. but ideally you’ll want to set it aside untouched for more than 10 years. This maximises your chance for growth and allows you to take advantage of compound interest.

Make sure your money is safe

Before you start investing make sure the company you are using is regulated by the FCA and protected by the Financial Services Compensation Scheme. This means you’ll be covered for up to £85,000 if the investment company goes bust.

If something seems too good to be true, then chances are it is and it may be a scam. Check for known investment scams on the FCA’s Scamsmart site.

How are you planning to make your savings grow?

Pin It