Credit Rating

Saving

The starting point when saving is likely to be a bank or building society account. With a savings account, you'll usually get back the amount you put in plus a bit extra in interest. This means they are a low-risk way to store your spare cash. This risk is the key difference between saving and investment products.

How Inflation May Affect Savings

Although cash held in savings is generally secure, the impact of inflation will reduce the buying power of your money over time, unless the growth you receive through interest is at a higher rate than the rate of inflation.

Investing

Investments are unlike savings accounts as they invest in assets such as shares, bonds, and funds. Therefore, there is a greater level of risk to your money because they can go up and down in value, but this can mean greater returns. There is a possibility that you could lose some or all of your money, depending on how much risk you choose to take.

Because of the risk of losing money, investing should only be considered for money that can be put aside for the medium to long term (at least 5 to 10 years) to potentially balance out the ups and downs in the markets. Investments can be made using a lump sum or regular investments of smaller amounts, usually on a monthly basis.

There are a wide range of different types of assets that can be used for an investment, and each of these will have different potential for growth and carry a different amount of risk.

Investment Time Periods

When talking about investing, you will frequently see references to the short, medium, and long-term. While these time periods aren’t definitive, they usually mean the following:

• Short-term: Less than 5 years
• Medium-term: Between 5 and 10 years
• Long-term: More than 10 years

Consider Investing If...

• You want the chance of receiving a return higher than you’d get by putting your money into an easily accessible savings account.
• You are willing to accept an element of risk to your money.
• You wish to invest for the medium to long term (at least 5 to 10 years).