WHY NOW IS A GOOD TIME TO START INVESTING

Many of us have been hit hard financially by the pandemic, but if you’re among the lucky ones who have been able to save, here’s why investing that money is your best bet for making it grow, explains Ruth Jackson-kirby

Make your money work harder

For some of us, 2020 has been a financial struggle, as we’ve had to cope with a reduced income. However, many of us are actually better off after lockdown. Not spending on commuting, childcare or socialising has meant the average household saved £868 a month over March, April and May. Bank of England figures show total savings balances increased by a record £25.6bn in May – that’s £921 per household. ‘If you ever wondered what it would take to turn us into a nation of enthusiastic savers, you have your answer,’ says Sarah Coles, personal finance analyst at Hargreaves Lansdown. ‘It’s not the kind of lifestyle change anyone would propose for the long term but, for many people, the savings have been the silver lining of the Covid-19 cloud.’

Now, as the country faces a recession, it’s time to make this money work hard to help us in the future. When Hargreaves Lansdown surveyed people to ask what they would be doing with the extra cash they now have, almost half said they would save it for a rainy day. While this is great news, many of us aren’t saving in the right places. Most of that £25.6bn was deposited in easy-access savings accounts with an average interest rate of just 0.29%. It is a good idea to keep your emergency cash in an easy-access savings account, but money that you plan to squirrel away for five to 10 years should be invested to give it the best chance to grow.

Inflation (as measured by the Consumer Price Index) is currently at 1.1%, meaning the price of the everyday things we buy is rising by 1.1% a year. If your savings are only growing by 0.29%, then your money is shrinking in value and you’ll get less and less for your money each year.

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