Personal Savings and Investments
As early as childhood, most of us learn that we should store money to save for the future. It’s about providing for future needs and protecting against unexpected causes of expenditure. Putting your money in a piggy bank or in a multinational investment house can provide you with the security and freedom you need to save for something special and even spend on those surprise costs that you hadn’t anticipated, without taking on any debt.
When you are planning your finances, it’s important to distinguish the difference between savings and investments.
Savings are generally funds that you set aside, but can access relatively quickly for a specific need or purchase, like a holiday or a new car. The most common way of saving is into your bank with a simple current account, which allows a small amount of interest, but facilitates regular payments and withdrawals without detriment to your savings. Here, your money can be accessed in an emergency. And for every £1 you put in, you get £1 back, and possibly some interest.
Investments are designed to be held for a longer term, usually at least 5 years. Therefore, you need to be comfortable with the decision to commit this money for a period of time, and you shouldn’t consider investments unless you have some savings in place. Company shares allow you to invest your money in a company, with the prospect that the company will prosper and the shares will increase in value over time. Whilst the benefits are potentially high, the risks are also much greater. In fact, most investments are not guaranteed to return your money in full, although they do offer the prospect of higher returns than deposit accounts.
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