Could your money be working harder?

How often do you check that your savings are still working for you? Or are you like most people and take a "once and done" approach to saving?

Savings can sit in the same account for years without much attention. Meanwhile, your circumstances may have changed, your financial priorities may have shifted, or your plans and needs may have moved on.

Talk Money Week is a good opportunity to take a fresh look. Start by thinking about what you want your savings to achieve, then consider a bigger question: does the way you save and invest your money still suit your goals?

Are your savings working towards your goals? 

When did you last review your savings? It's worth checking that your money is still working towards your goals, whether that's having cash readily available for emergencies or building a lump sum for the future.

Think about what matters most to you. Easy access to your money? The certainty of a guaranteed return? Or the potential for greater growth over the longer term?

Different savings and investment products serve different purposes. The important thing is making sure you've got the right mix for your circumstances.

Are you making the most of ISAs?

Alongside checking your savings goals, consider whether you’re making use of the tax benefits available through Individual Savings Accounts (ISAs).

A Cash ISA holds cash savings and lets you earn interest free of UK Income Tax. A Stocks and Shares ISA holds investments, with returns free of UK Income Tax and Capital Gains Tax.

You can split your current £20,000 annual ISA allowance between Cash and Stocks and Shares ISAs or put it all into one type. 

That brings us to an important distinction: although both carry the ISA name, one is for cash saving and the other is for investing. So, what’s the difference?

Saving and investing: what’s the difference?

Saving usually means putting money into a cash account and earning interest. It can provide a useful home for your emergency fund and money you expect to need in the next few years, such as for a holiday or replacing your car.

Investing means putting money into assets, such as shares or commodities, with the aim of achieving growth or income. It involves taking a level of investment risk. Some investments will carry more risk than others, usually as a trade-off against the potential for higher returns, but in all cases the value can fall as well as rise, and you could get back less than you put in.

Investing is generally something to consider for money you won’t need for at least five years. A longer timeframe gives investments more opportunity to recover from falls and deliver an overall profit by the time you need it, albeit this isn't guaranteed.

Remember the effect of rising prices

Cash savings have an important role, but inflation can reduce their spending power.

If prices rise faster than the interest your money earns, your balance may grow while the amount it can buy falls. Over many years, that difference can become significant.

Investing offers the potential for greater long-term growth, which may help outpace rising prices. That potential comes with risk as we described earlier, and charges also affect the return you receive.

Give your money a purpose

You can use both saving and investing for different goals.

Before making changes, remember to ask yourself:

• What is this money for?

• When might I need it?

• Do I have accessible savings for unexpected costs?

• How would I feel - and cope financially - if an investment fell in value?

Your answers will help you understand which options are worth exploring.

This Talk Money Week, start with one small step: check your savings goals. Then take a little time to think about how you're going to achieve them.

Here at Police Friendly and Metfriendly, we can explain our savings and investment options, and answer your questions, helping you understand how the products work.

*This article provides general information, not personal financial advice.*