As inflation reaches a five-year high, Chris Atkinson, head of consumer distribution at Zurich gives some top tips on making the most of your savings.
- Do all you can to beat inflation
Don’t lose out from just storing all of your hard earned money in cash ‘under the mattress’, or you can be sure inflation will eat away at those savings. Keep a portion in cash, but investing smartly and according to your level of income and outgoings can deliver real returns over the long-term and ensure your money grows. There are still some saving accounts and products on the market, which pay above-inflation returns, so make you look around to get the best deal.
- Carry out a money health check
You may have built up a decent pot of money, and your investments may have performed well originally, but it’s important not to become complacent. Carrying out a regular ‘health check’ on your finances will help you to identify any areas that need to be addressed, such as a savings account with poor returns or an investment that is losing you money.
- Don’t put all your eggs into one basket
Faced with a challenging economic environment, you don’t want to rely on just one tactic. The key to making the most out of your savings – and protecting them – is to ensure you ‘diversify’, which means spreading your money across a range of different investments. Taking a bigger risk can deliver a bigger pay out, but you also have to be prepared to lose some, or all of the money you have invested.
- Don’t make any knee jerk reactions
Don’t let sudden rises or falls in the stock market panic you or lead you into making sudden investment decisions without the necessary research. If you have an investment plan, you can often trust it and, if necessary, simply make a few adjustments to protect your assets.
- Take advice
Don’t be afraid to ask for advice. Younger investors can afford to be a little riskier in their investments as they have longer to see out any market volatility. However for those nearing or already in retirement, reducing risk is important as there is less time to re-build any losses. At this point, financial advice can go a long way towards helping you to identify the best investments for your individual circumstances.
- Stressing about your future? Make the most of tax efficient savings
Making use of your annual £20,000 ISA allowance and putting small amounts away means you always have a little pot of money building in a tax efficient way that’s easy to access. A pension is another tax efficient way to save – you receive ‘cash back’ from the Government in the form of tax relief on contributions that you make – and with a workplace pension, you may also benefit from employer contributions