According to government statistics, a large number of people have been able to increase their savings in lockdown dramatically. With that in mind, here are three smart money moves anyone can make today if they have £1k, or any other amount spare, from lockdown savings.
Smart money moves
When it comes to smart money moves, the best thing you can do today is pay off any outstanding debt. Debt, especially high-interest debt, can be extremely damaging to your financial situation over the long term. Therefore, it makes sense to stay away from borrowing as much as possible. That’s especially true with interest rates where they are today.
Most savings accounts don’t offer much more than the Bank of England’s base rate (currently 0.1%) in interest, whereas most lenders charge interest rates of as much as 30% on credit cards. Saving money at 0.1% while paying interest of around 30% per annum doesn’t make any sense at all.
That’s why, as smart money moves go, paying off any outstanding debt is the most sensible.
Long-term savings
Another smart move is boosting your long-term savings or pension. If you’re saving for a big-ticket item, such as a house, or deposit on a flat, putting more money into your savings pot whenever you can is a sensible financial decision.
For first-time buyers and pension savers, there are also tax benefits available. For example, a Lifetime Inidividal Savings Account (LISA) account offers a 25% government bonus for pension and first-time buyer savings. Meanwhile, any contributions into a Self-Invested Personal Pension (SIPP) are entitled to tax relief at your marginal tax rate. That’s 20% for basic rate taxpayers.
These two bonuses could give your financial nest egg a quick leg-up without any extra work on your part.
Invest for the future
If you’ve followed the smart money moves above, opening an investment account could be another sensible financial decision. Investing in the stock market is one of the fastest ways to grow your wealth over the long term.
For example, over the past three-and-a-half decades, the FTSE 250 has produced an average annual return of 12%. According to my calculations, at this rate of return, an investment of just £300 a month would grow to be worth £1m within 30 years.
You can invest your money inside a LISA and SIPP as well. Doing so comes with certain tax benefits. These allow investors to take advantage of both the government bonus and tax benefits over the long run. As smart money moves go, combining these two tips could significantly improve your chances of achieving financial independence.
Another way to grow your wealth is to invest in individual stocks. A diversified portfolio of individual stocks is a great way to profit from great companies, which may outperform the market over the long run while minimising risk.