In the past saving your money in a bank account was the ultimate deal. But with the continuous decline in interest rates going as low as 0.05 for £1,000 you need to find other alternatives that can bring in more returns than just a couple of pounds in a year.
Here are some other options to generic savings account:
Invest In Your Pension (SIPP)
A Self Invested Personal Pension which is commonly referred to as SIPP is a long-term mode of investing or saving. Options like the Moneyfarm pension mean you don’t have to be an investment expert at all- you let them do all the hard work. They have experts who manage our portfolio and ensure it is re-balanced at regular intervals. You can tell them when you’d like to retire and how much you’d like to save, transfer your existing pension, and then track your investments with complete transparency.
Certificate of Deposits (CDs)
A CD is a certificate of savings accounts that have restricted access for a specific period. CDs entered the United Kingdom market from way back in 1958, and according to the Federal Reserve Regulations they need to be at least seven days or more to be considered a certificate of deposit.
They are usually issued by banks, local governments or money market funds. Depending on the investment company, sometimes you can be allowed to withdraw the funds before the maturity date, but you will often incur a penalty on the revenues.
Peer to peer lending
P2P lending which is an abbreviation of peer to peer is a mode of investment where you lend money to businesses or individuals through an online platform. Though considered risky by many due to the possibility of borrowers defaulting on payments, P2P offers excellent returns.
To minimize on risks of your investments on P2P lending, the platform providing the loans should spread out your investment among different borrowers.
Peer to peer lending is sometimes referred to as crowd lending or social lending. Since it is not protected by any authority, you have the choice of who to offer the loan based on their credit history.
Investing in Bonds
It is totally normal for governments and corporations to borrow from investors. This kind of borrowing is referred to as government bonds and corporate bonds. They are issued as a form of security to assure the investor that the money will be paid back with interest.
Governments bonds are very expensive, so they are suitable for someone who has large sums of money available for use. Depending on the terms of purchase you will receive yearly payments for the gains which are taxed. Only municipal bonds are exempted from federal taxes.
Money market account
This is an account that gives you both the benefits of a checking account and a savings account. A money market account is insured by the Federal Deposit Insurance Corporation. Depending on the investment firm of your choice the initial deposit can be as low as £1 or as high as £1,000.
To avoid losing your money in one investment opportunity, it is advised that you spread out your portfolio to cover the risks. And of course, make sure you get professional advice and do your research.