Finding The Right High Interest Investments

What you look for in your savings accounts differs from your day-to-day current account. Not only that, but you’d be well advised to spread your savings across different accounts and/or investments. This way, not only will you avoid putting all your eggs in one basket, but also you can tailor your savings to meet different purposes.

Financial experts advise you to keep, as a general safety net, enough cash put by to cover all your living expenses for three months. That will provide basic security so that you can be sure if your earnings stopped for any reason, you’d have a bit of time to get back on your feet. This type of ‘emergency pot’ is best kept in an account with easy access – avoid tying up all your savings in long-term investments.

Generally, savings accounts offer higher interest than current accounts, but you can expect that they will be less flexible. Some require notice before you make any withdrawals – usually between 30 and 180 days – and you could be liable to a loss of interest if you want to access your money faster. However, these ‘notice’ accounts usually pay a higher rate of interest than instant access accounts.

After you’ve ensured you have your emergency pot covered, you’ll need to start planning for the mid and longer term. Things to consider when planning include:

• Length of investment
  Do you need to save for a particular reason, such as a wedding or your children’s education? Consider whether you are likely to want to dip into your savings every so often, or whether you will be able to leave them untouched for several years.

• Risk
  Some investments, such as buying stocks and shares, are classed as ‘high-risk’. There’s a chance you could make a fortune, but also the chance you might lose one! Decide how much of a risk you are willing to take before embarking on this type of investment, and don’t sink all your savings into high-risk strategies.

You should, therefore, have a three-pronged approach to your saving strategy:

• Emergency funds
  Kept in a safe, easy to access savings account with a relatively high level of interest

• Medium and long term funds
  Keep a proportion of your savings for specific, planned expenses in a longer term secure account, such as an ISA or Fixed Rate Bonds

• Flexible savings:
  Consider surplus money as ‘flexible’ savings, which you could use to invest in longer-term investments. If you’re prepared to take a gamble with high risk investments, look into stocks, shares and unit trusts