Three ways to multiply your savings

Investing is one of the key steps towards achieving financial stability and securing your future. In today’s article, we will cover three popular methods of investing through which you could increase your savings and achieve your financial goals. For those who are considering buying property to invest, our article will provide valuable tips.

Of course, any investment involves risk and your investment can fall as well as rise so you may get back less than you invest. Before making any decisions, consider independent advice from an appropriately regulated financial adviser. We would also like to add that Extend Finance Ltd. does not provide investment advice and takes no responsibility for investment decisions made after reading this article. The post is also not any form of investment advice and is for informational purposes only.

Buying and renting property

Buying a house in the UK for rent is a well-known way of investing. This process can provide rental income, and additional profits due to the possibility of an increase in the price of the purchased property. However, property prices in the UK can fall as well as rise, and past price growth is no guarantee of future growth.

Here are some key benefits and steps to consider:

• Rental income: Rent can help cover the costs of owning the property, including Buy to Let mortgage repayments, but income can vary because of empty periods, maintenance, tax and changes in mortgage costs;

• Portfolio diversification: Property can add a different type of asset to a portfolio, which can spread risk but does not remove it;

• Capital value: Over the longer term, property may appreciate in value, which can bring profits on eventual resale.

Rents and house prices do not always move together, and both depend on local demand, interest rates and wider economic conditions. If you are interested in this option, the Extend Finance team would be happy to help you find a suitable mortgage. We encourage you to get in touch!

Investing in dividend stocks

Investing in dividend stocks may be another effective way to build wealth. It involves buying shares in companies that regularly pay dividends to their shareholders. Some features of this approach:

• Income: Many companies pay dividends to shareholders, but dividends are paid at the company’s discretion and can be reduced or stopped;

• Capital growth: The value of the shares can also increase, benefiting you when you eventually sell;

• Diversification: Thanks to the variety of companies available, investing in dividend stocks allows you to diversify your savings;

• Stocks and shares ISA: To open a standard stocks and shares ISA, you normally need to be at least 18 and UK-resident, with limited exceptions for qualifying Crown servants and their spouses or civil partners. Junior ISAs have separate rules. You can put up to £20,000 into ISAs each tax year (this allowance is shared across all your ISAs), and you do not pay Income Tax or Capital Gains Tax on income or gains from investments held in a stocks and shares ISA. For more on this see: Stocks and shares ISAs.

What do such investments look like in practice? First and foremost, you open an account with an investment platform that offers a stocks and shares ISA. The next step is to buy stocks. Depending on your preferences, you can choose to pick the shares yourself or use the guidance and recommendations of experts. You will find many ready-made investment portfolios on the internet.

Choosing shares yourself lets you decide on the level of risk and the sectors you invest in, while ready-made portfolios can be simpler to use; costs and results vary. This can be done, for example, on the DividendIntel website. How often dividends are paid depends on the company; many UK companies pay twice a year and some pay quarterly. With the proceeds, you can buy more shares and in this way slowly build your wealth.

Holding money in an account with interest

In addition to property and dividend stocks, there are many other investment options. Another option is to keep savings in an account that pays interest. Cash savings may suit people who want lower risk than investments. Eligible deposits with a UK-authorised bank, building society or credit union are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per person, per banking licence.

Savings rates change over time, often following the Bank of England Bank Rate, and vary between providers and account types, so it is worth comparing them.

Investing can be a key tool in building a financial future. For those considering investments such as buying property, investing in dividend stocks or alternative options, there are different paths to choose from.

It is important to have a good understanding of your goals and take certain steps. Keep in mind that inflation can reduce the real value of cash savings over time.