Across the UK, over 61% of us regularly deposit funds into a savings account. Whether you’re saving for your children, a large purchase such as a home or car, or simply saving for a rainy day – we all want to get the most out of our savings. However, with the UK economy currently in a state of limbo, many savers are questioning whether their money is doing the most by just sitting idly in a savings account. Is there a way to make your savings go further, especially in the current market?
At the time of writing, the UK economy is in a slump. Despite narrowly avoiding a recession, inflation is high and interest rates are creeping up. Although these are expected to return to more moderate levels in the coming years according to KPMG, there is no doubt that people are feeling the pinch. This leaves many savers across the UK wondering whether they ought to continue saving or channel their funds into an asset class. Paired with the cost-of-living crisis, the average person now has less disposable income and therefore less to save. As such, there has never been a better time to make your money go further by reassessing what to do with your savings.
So, how does high inflation in the current market impact the value of your savings? In short, having cash in the bank or liquid assets during times of high inflation devalues your money. Your savings lose value in ‘real’ terms, meaning that your funds will be able to buy you less over time. Although the interest on savings is slightly higher, this is not enough to compensate for the levels of inflation. Ultimately, this means that your money is worth less. This is why many savers are choosing to channel their savings into investments that have a greater chance of not just keeping up with inflation, but staying ahead of it.
When it comes to investing in an asset class to put savings to use wisely, many choose property. But why select property for your next investment? Here are 5 reasons why:
Firstly, property can be a hedge against inflation. This means that as the value of money erodes over time, property maintains its own relative value. Should inflation increase, so will the value of your property and the potential profit you make from rental income – you cannot say the same for money sitting in the bank. Also, despite various market fluctuations over the past century, property has held strong when it comes to price growth. Historically, UK property values have doubled every 15 to 20 years, so for those looking to invest for the long-term, property can be an excellent asset to get the most from your hard earned money.
If you have a substantial amount of money in your savings, investing all of it into high-risk asset classes such as stocks and shares may not be wise. Not only are these assets more volatile, but they are far more difficult to understand. Additionally, they often require a lot more hands on attention to achieve the best performance. However, property is a much more accessible way of making use of your savings. Compared to alternative asset classes, the buy-to-let market is much easier to make sense of. This allows you to take charge of your money and better understand how to reach your financial goals without relying on the complexities of stock predictions or buying and selling shares. UK property is also often stated as one of the more stable asset classes, meaning that even if you want to invest some of your savings in stocks and shares, property can offer a good diversification option to keep your portfolio balanced.
Ultimately, people will always need property, hence why tangible assets are typically more stable than financial assets. If you choose to invest in buy-to-let property, you can benefit from long-term, recurrent income that can provide savvy investors with financial freedom in years to come. As such, property investment can present lower risk and greater longevity for investors. Just make sure to do your research and consult a financial advisor and a local property expert prior to making any investment to make sure you’re buying in the right location, at the right time and for the right price to get the best return.
Leveraging is when you utilise capital that you have borrowed from a source such as a lender in order to boost your potential return on investment. Although leveraging requires borrowers to get into debt, it provides them with the ability to multiply their buying power. Rather than spending all of your savings on property, it is easy to leverage with the help of a lender and a mortgage.
However, you should be careful when leveraging, and consult a financial specialist before doing so. There will always be the risk of losing funds, and your investment not reaping the rewards you expected. Be sure to do your due diligence before leveraging.
Although the guidance and information we’ve provided you with here can form a basis for your next investment, everybody’s financial situation is different. It is therefore important that you consult with a trusted financial advisor before making any significant decisions regarding spending your savings in the current market. We recommend the team at ME Financial Services for those looking for reliable and impartial financial and mortgage advice.
On the hunt for more property resources? The At Home With Centrick hub is the best place for finding up-to-date property guides and information. Whether you’re looking to purchase your first home, exploring your investment options, or searching for savvy ways to boost your home’s value – At Home With Centrick has the answers.
Want to talk to someone about how to make the most of your savings in the current market? Fill out the form below and a member of the Centrick team will get back to you shortly!
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