Pay rise, bonus or spending less – why not invest your extra cash?

Whether you’ve built up savings by spending less during lockdown, have had a pay rise or bonus or are no longer shelling out on expensive commutes, investing this money wisely could stand you in good stead for the future. And if it’s money that is new to you, you probably won’t even miss it!

Why should I invest my money?

Interest rates on cash savings are at rock bottom right now and with inflation eating away at the spending power of cash over time, it can feel like money in cash savings accounts is evaporating. So once you have an emergency cash fund – enough money to keep you going for at least three months but better still six – investing can get your money working harder. It does come with some risks, because investments can go down in value as well as up but, if you invest wisely, and over a decent number of years, the power of compounding can have a pretty significant impact. 

Where should I invest my money?

Pensions

If you can afford to lock it away for the long term, adding more to your pension is a fantastic option because when you add money to your pension, the Government does too. Our infographic explains the different tax reliefs and allowances.

ISAs

ISAs are also excellent if you want the flexibility to access your money when you need to (remembering that you should be willing to put your money away for at least three to five years when investing). There are a number of different types of ISAs but if you want to invest, a Stocks & Shares ISA is the simple option. ISAs are great because you don’t pay tax on any gains your investments make. Because of this, you are only allowed to pay £20,000 a year in to an ISA.

Remember, tax rates and reliefs depend on individual circumstances and can change.

Investment accounts

If you’ve maxed out your ISA and are looking for a simple account (that doesn’t come with tax breaks) it’s straightforward to buy and sell funds and shares with an investment account.

How should I choose investments?

There are thousands of investments available and, among these, a fair number of bad ones (we call them the dogs)  so make sure you do your research. We have a guide How to Choose and Manage your own Investments that’s a great place to start as well as a series of lessons for absolute beginners. And if you’re more experienced, you can dive straight in to the Bestinvest investment search tool, which creates an easy way to search for investments, read about them, make comparisons and, ultimately, buy the ones you want.

What else do I need to think about?

Consider the charges. As with most things in life, investing isn’t usually free. The companies that help you invest – Bestinvest, the fund houses etc – charge you fees in exchange for their services. These vary widely from company to company and service to service and, as the amount you pays in fees eats into the amount you have left to invest, it pays to look at these closely. But do remember that cheapest isn’t necessarily best and you often get what you pay for.

How Bestinvest can help

At Bestinvest, we’ve got everything you need to make a success of investing:

• Choose from an ISA, Junior ISA, SIPP or investment account
• Help yourself to our free investment insights and fund factsheets
• Talk to our friendly telephone team on 020 7189 2400 whenever you have questions