PLANNING
Why invest rather
than save?
Generally speaking, people in the UK have a credit hangover. We have binged
on credit cards and loans without paying too much attention to saving.
When we do save, we are suckers for safe, cashbased investing. Something like eight in 10 of all ISAs
opened each year are cash ones and only two in 10
are of the stocks and shares variety. At the time of
writing, the very best cash savings rates range from
1.5 per cent for easy access products up to 2.5 per
cent for fixed term deposits.
With inflation eating into these meagre gains, it is
unlikely that regular cash saving will result in an
adequate retirement fund over the long term.
Einstein once said “compounding is the Eighth
Wonder of the World”, by which he meant that if
your savings grow by a certain percentage each year,
they will grow by a larger amount the following year.
and so on.
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With equity investing, your investments can pay
dividends – or cash distributions to shareholders – as
well as ap preciate in value, so if you invest those
too, your money will grow more quickly.
Key points
The stock market has always significantly
outperformed cash over the long term
As long as you accept the possibility of shortterm falls in your investments, over time they
should grow faster than cash-based savings
Inflation will decrease the value of your cash