Everyone has something they would love to save up for and buy. However, what are we supposed to do with a savings account that never accrues any value?
Investments may carry more risk but there is much greater growth potential. Investments generate much more income than savings accounts. However, before you can invest successfully you have to understand the different investment opportunities that are available.
Savings Accounts
First, let’s take a closer look at saving accounts and examine why they are inferior. When we place money in a savings account, we hope that at the end of the financial year that there will have been dramatic growth. This never happens. Everyone thinks that they should be seeing a return of at least 1% on their savings but that is much higher than the rates mot banks or building societies offer.
Trying to save money in a savings account is hard. One of the advantages often cited is that you can always withdraw money from a savings account. While this is technically true, doing so means that you are losing money on an annual basis. If your money is invested in a way that you do not have access to it then it is also safe from you.
Real Estate
Investing in real estate is one of the most popular avenues for new investors and for good reason. First, owning a property is like having a super-charged savings account. Any property that is kept in reasonable condition becomes worth much more each year than a savings account with an equivalent amount of money. It is true that buildings require maintenance, but good buildings need relatively little and there is an easy way to make back your maintenance costs and then some.
Renting is the go-to choose for property owners. Not only does it cover the maintenance costs of your home, but it also generates enough money that you can earn extra. A reputable letting agency acts caretaker and they only require a percentage cut of the rent. In return, you earn money, your property grows in value and it is looked after. It is a win-win situation for you and when you are ready, simply sell it to cash out.
Stocks and Shares ISA
Stocks and shares may seem intimidating to new investors, but they are actually an amazing way to put your money to work. Firstly, there is no need to be put off by the seemingly complex nature of this type of investment. When renting out a property, you let a management company do the hard work on your behalf. Stocks are the same except you use a stockbroker instead of a lettings agency.
Stocks and shares Isa is a particular type of investment that lets you earn money without being subject to capital gains or income tax. This way, you get to invest your money and watch it grow in real time much more accurately than you can with a property. Experts look after it for you and actively help you reach your financial goals.