When thinking of your future, savings are an important aspect. With so many different long-term saving options available, it can be difficult to choose which is right for you. Here’s a quick rundown of the pros and cons of the main options for what to do with long-term savings.
Stocks and Shares
They say that investing money in stocks and funds is an option worth considering if you’re sure you want to put it away for at least five, but ideally more like 10-20, years. Savings in stocks can see generous returns, with the market often growing, on average, by around 8% per annum, but this is, of course, a riskier option and could lead to losses.
If you’re not too risk averse and you’re willing to leave your money in for a long time – long enough to weather the inevitable dips in the market – then stocks might be an option for you.
Many people choose to put their savings into property, either by buying outright or by taking out a mortgage. By buying property in sought-after areas, you could see the value of your money skyrocket in a matter of years, and if you’re investing in a second property you can make additional income by letting it out, too.
However, property comes with its own drawbacks: properties must be maintained at a cost to the owner, and there is no guarantee that property values will rise within any given timeframe.
The safest option is usually to keep your nest egg as cash; max out your annual ISA limit and shop around for the best accounts which offer the best interest rates. While you won’t find interest rates anywhere near as good as the returns you can get from both property and stocks, there is also no risk of losing money when you keep it in cash. Very risk-averse savers often plump for this option, which offers peace of mind and security.
Please note that the value of investments and the income derived from them may fall and you may get back less than you invested. Past performance is not a guide to future performance.