Total Guide to Making Your Money Work Harder

With money and personal finance being a key topic in our day-to-day lives, we enlisted the help of a financial expert to give us some inside info on making your money work harder. Here's what we found out:

How much do you value your savings?

The Old adage “Stick it in a Building Society and leave it” simply doesn’t work anymore. With interest rates at an all-time historic low, and economists predicting little improvement for many years to come, its time to start thinking about ways to make your ‘hard earned’ cash, work harder for you…

If your savings are sat in a Bank/Building Society Account, you may think they are free from risk, in fact, your savings are actually exposed to the following risk’s;

- Interest Rate Risk – This is the risk that Interest Rates can fluctuate/fall and have an adverse affect your investment return (Very “Appt” at present!)

- Inflationary Risk – This basically means that, as Inflation rises over time, the ‘buying power’ of your cash is depleted, severely.

- Default Risk – This is the risk that your Bank/Building Society might go bust (Another very “appt” one considering recent times!)

So, it is our view that to really get the most out your savings, deposit accounts are not the way to go. We believe that utilising Investment based, Inflation proofing products are far more likely to give you a better return than Cash Deposit’s over the medium to long term, and here’s how:

- Take advantage of an ISA (Individual Savings Account) – ISA’s have the following benefits:

ISA’s are a great way to access Global Investment opportunities, such as Top Performing Funds/Fund Managers, and different Asset Classes such as Bonds, Property, Commodities and Equities. Equities are widely regarded as the best ‘Hedge’ against Inflation and they have a proven track record of out-performing inflation over the medium to long term. Simply put – your savings are far more likely to hold their worth as the years go by, and won’t be eroded by the harmful effects of Inflation.

- ISA’s are the most tax efficient savings vehicle in the UK. The ISA Allowance for 2012/2013 is £11,280. That means you can invest anything up to £11,280 into a Stocks & Shares ISA this tax year, and the fund will be almost entirely free of Tax! Now, most of us pay Tax, but the less Tax we pay, the better, right? The Tax savings can be HUGE… So, take advantage of them. Especially if you pay Higher/Additional Rate Tax – potentially saving 40/50%!

By following the above, this will allow you to build up a significant sum of money, which is Inflation Proofed for the future, can be accessed immediately, and is contained within the most ‘Tax Efficient’ environment available on the Market today.

ISA’s, as with any Investment, do come with their own risks, investment’s can go down as well as up, and you may not get back the full amount you invested.

It is important that any investment products match your feeling and preference in relation to investment risk and return, whilst taking into consideration your current assets.