11.2 million people in the UK have virtually no savings. But having money squirrelled away is essential when it comes to securing a stable financial future for you and future generations. If you’re wondering how you can save your money wisely, we’ve outlined some of the best options below.
1. Savings accounts
One of the most straightforward and accessible options is a regular savings account. Most banks will offer you one and many will let you instantly withdraw money from these accounts.
To help you grow your capital, your bank will pay you compounding interest for keeping your funds in the account. This will slowly grow your money over time with minimal risk.
2. High-yield savings accounts
Unlike traditional savings accounts, high-yield savings accounts have higher interest rates which means your money will grow over time, combating high inflation.
These accounts are typically offered by online banks, which can afford to provide better rates (due to lower overhead costs) than traditional high street banks.
If you go down this route, make sure you compare the interest rates, fees and ease of online banking to make sure you find an option that suits your needs.
3. Certificates of Deposits (CDs)
Certificates of Deposits (CDs) are an excellent option for those looking to save money with minimal risk. A CD is a time deposit offered by banks which pays a fixed interest rate for a specified term, ranging from a few months to several years. In exchange for this fixed rate, you agree to leave your money in the CD for the term.
Although these are a great option, you can’t easily access your money. This means you need to be sure you won’t need the cash any time soon.
4. Stock indices
Many people invest in popular stock indices through index trading as a long-term savings investment.
Stock indices like the S&P 500 provide a way to invest in a diversified portfolio without picking individual stocks.
You can invest in stock indices through index funds or Exchange-Traded Funds (ETFs). These investments track the performance of a specific index which means that you can have access to the overall market with lower fees compared to actively managed funds.
While stock indices come with the risk of market volatility and potential losses, they historically provide higher returns over the long term compared to traditional savings options.
Final thoughts
There is no one-size-fits-all approach to saving money. While some people like to play it safe with a basic savings account, others are willing to take on more risk for higher potential rewards. Which one is best for you depends on how much you can contribute, how much you can afford to lose and whether you need access to your funds in an emergency.
