Picking up from my last post, now we have built up our emergency pot (six months of living expenses, or one year if you are like me and want to give yourself more of a buffer). Then what? Today I’m going to introduce some food for thought …
If we go with the old age wisdom passed down by our parents,” Yes”, we’d keep on saving. What that does, the savings pot keeps growing and gives us some comfort and reassurance. In the the old days, interest rates were quite high and there were benefits to be derived the high returns, but more so from the resulting compound interest, if the money remained in your account for the long term.
These days however, after your emergency pot is full, to keep saving is to put your money to sleep! In fact I’d go as far as to say that to keep saving is to slowly kill your money off; because interest rates for savings accounts in the U.K. are as low as 0.01% (depending on the type of saving account you hold) and inflation rate is at 0.5% (as quoted by BBC News a few days ago https://www.bbc.co.uk/news/business-12196322). This means the value of the money in your account is being eroded, in spite of the miserly 0.01% interest (your money is slowly dying I’d say)! To put it into context, you are unlikely to be able to buy exactly the same things you buy with £10 today in a couple of weeks time. So why slowly kill your money off!
To top things up, there is discussions about negative interest rates, which in the main is to get banks to spend rather than hoard money, but will more likely filter down to us individuals at some point and if does, it means we would be charged for keeping money in the bank (which during times of economic uncertainty, is our natural instinct).
So instead of saving for the sake of saving and for your comfort, why not make your money work for you, saving to invest, build your pot up with the intention to have surplus money that you can then make work for you.
What to invest in; especially in these days of volatility in the markets and global economy as a whole… that’s my biggest dilemma and I guess its the same particularly for those of us starting out on this journey quite late (and who are more risk averse). A few ideas of what to invest in are shown below.
Come on the journey with me to see how I am going about resolving the dilemma; perhaps you can learn from it or give me some pointers.
Note: I am not a financial advisor, my posts take you through my past experiences and discoveries I am making on my journey to financial freedom. If you find my suggestions useful, please do your own research and make decisions on the basis of your findings.
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