Having cash that’s easy to get to – for example in a bank or building society account, Premium Bonds or a cash ISA – is the foundation of any good financial plan. We all need money to cover unforeseen emergencies, as we don’t want to raid any medium to longer term investments if we can avoid it. But when it comes to cash in hand – how much is too much?
You should consider keeping sufficient to cover 3-6 months of your regular expenditure.
Anything more than this is potentially being wasted….wasted in the sense that it’s likely to be earning very low levels of interest (the average cash ISA rate is now the lowest since Bank or England records began, at 1.43% Source: This is Money.co.uk 25th Sept 2015) – which means it’s not really growing ahead of inflation. Over time, inflation erodes the buying power of our cash, meaning it’s effectively worth less in future than it is today. One solution is to invest it, aiming for growth and positive returns ahead of inflation and after tax.
If you have surplus cash and are prepared to invest for a timeframe of at least 5 years, you should consider taking advice on tax-efficient investments.
This means that your hard-earned savings can continue to work hard for you and potentially benefit you in the future.
Although you will need to be aware that there are risks attached to investing, as values can fluctuate and you could get back less than the amount you invested, working with a good financial planner can help. He or she will discuss the risk profile that’s appropriate to you, your current circumstances and your future goals, and this will enable you to make suitable investments that have the potential to grow into a decent “nest egg” for you.
It’s important to keep the end goal, or purpose of the investment in mind – the nest egg could be for a long haul holiday, a house deposit, home improvements, or any other reason that’s relevant to you and your life.
This is the real purpose of investing – giving yourself the opportunity to create more money in the future than you have today.
So don’t let inertia keep you from working with a financial planner to make wise investment decisions, someone who will then monitor your investment regularly on your behalf, working with you to keep it on track over the medium to long term.
To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, please contact Amanda Redman on 07801 045587, email [email protected] or visit www.amandaredmanfp.co.uk