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The different ways to manage your savings

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The importance of managing savings

You might think that the act of keeping money aside each month is sufficient to save effectively. However, how you store your money is just as important to ensure these funds retain their value.

As most standard bank accounts don’t have interest rates that equal or exceed inflation, you lose spending power over time when your savings are just sitting there. Other forms of investment and tactical spending can boost your short-term savings and be better for your long-term financial health.

We explore the different ways to manage your savings and how these can be beneficial.

How can you manage your savings?

Fixed-rate banking

Banking is an attractive way to store your savings as it is secure and requires minimal maintenance. However, this low-risk way of investing funds can leave you with a real-terms loss on your funds.

If you enjoy the ease of banking, you could go for fixed-rate savings accounts that have higher rates and sometimes the benefits of compound interest in exchange for leaving funds locked away for an agreed amount of time. Investigate the option of using an ISA for effective tax-free saving.

Long-term investments

Looking for higher yields on your savings? You can use a portion of your savings to experiment with long-term investments in the stock market.

Keep your investments low-risk to protect your savings, especially if you’re new to trading. After all, low risk doesn’t have to mean low yield. For example, look into commodity trading to invest in gold and other precious metals that are highly likely to hold their value. High-quality bonds that resist stock volatility and have high yield potential are another potentially rewarding avenue to explore.

Minimising debt

If you have outstanding payments on short-term borrowing options like credit cards, you should put a portion of your monthly savings towards paying off the debt. These types of loans often have short deadlines and high-interest rates and must be settled as quickly as possible to stay manageable.

With long-term loans such as student financing and mortgages, it usually makes more financial sense to sustain the agreed repayment schedules rather than paying off more than you need to.

Saving-led spending

Are your savings steady? Don’t be afraid to indulge in saving-led spending. This can be a good way to support your long-term financial health such as making renovations to increase the value of your house and reap the benefits in the future.

It’s also important that you enjoy a good quality of life alongside building up a savings pot, especially if you’re already in your retirement. As long as you’re careful, there’s no reason why you can’t dip into your nest egg as and when you need to, whether it’s to cover an expensive car bill or pay for a once-in-a-lifetime holiday.

This article is for information only. Please seek expert professional advice before making financial and investment decisions. 

Photo by Jamie Street on Unsplash

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