Saving your money, no doubt, is very important to make your future secure. But just saving it in a non interest paying bank account is not recommended at all. The problem is that many financially illiterate millennials view savings as an end in itself; on the contrary, savings is a means to an end. The aim of savings should be to invest it in avenues where it can grow. This saving and investing habit will make you a financially independent person sooner than others in your life. So, here are 7things that you can do with your savings.
1. Invest Some Part of Your Savings in Fixed Income Securities
Fixed income securities are financial instruments that pay a fixed amount of money at the end of a specified period. They are commonly referred to as bonds and the payment is regarded as coupons. Broadly speaking, there are two types of bonds namely, corporate bonds and government bonds. In the UK, government bonds are known as ‘gilts’ and are risk free financial instruments. So, if you hate to take on risk but still want to see your money grow, then you should start investing your money in gilts or other AAA-rated corporate bonds.
2. Invest in Blue Chip Dividend Paying Stocks
You can’t own a whole multibillion dollar company but you can buy its stock and become entitled to the dividend payment. Such stocks are known as blue chip stocks and are generally considered less volatile. It is imperative to mention here that you should never put all your money in one single stock rather you should construct a stock portfolio in order to diversify your risk. If you don’t understand it then you should find a reputable trustworthy stock brokerage company that provides money management services. Only invest a part of your savings that you can afford to lose in the financial market.
3. Lend Some of Your Savings and Earn an Interest over It
Yes, that’s possible. This traditional function that was performed by banking institutions can now be performed online. If you still didn’t get it then let us show you the power of disintermediation. Peer-to-peer lending is a practice that has grown popular in recent times. So, if you want to make a difference in other person’s life and at the same time earn interest on your money, then this is something that you should definitely try out.
4. Start Trading with a Fraction of Your Savings
Trading is where huge futures can be made and lost. It is interesting to see that most people opt to remain out of such an interesting game. If you have saved loads of money then you should invest 5% to 10% of it in the financial markets and trade it actively. Remember that you should only invest with the amount that you can afford to lose and that won’t adversely affect your lifestyle. Trading does not necessarily mean that you should trade stocks or bonds, rather you can trade ETFs, FX, Options, Futures. Ain’t got a clue about them? Well, a journey of thousand miles began with a first step. So what are you waiting for?
5. Invest in Mutual Funds
Rather than saving under your mattress you also have an option to invest in mutual funds. If you think you are too busy or uneducated to invest your savings yourself, then that is where mutual funds come in. Investing a part of your saving in mutual funds will also have tax benefit for you. You do not have to pay tax on the profit that you haven’t realized i.e. the profit that you haven’t withdrawn from the mutual fund. Remember that mutual funds are of many types. As a risk-averse investor you should only invest in money market fund.
6. Bet it Online
If you think that we’ve lost our mind and are giving you a brain-dead advice, then it’s time that you think twice before neglecting our recommendation. There are many people who’ve made fortunes by betting in the financial markets. Surely, futures market is the biggest platform where you can bet on the prices of literally every commodity but spread betting, although relatively new, is gaining popularity among many people. One biggest advantage of learning to make money via spread betting is that the returns generated are tax-free. Yes, you read that right. If you live in the UK and have made a profit while spread betting then the returns are completely tax-free.
7. Buy a Lottery Ticket
If you believe that you were born under a lucky star then you should purchase some lotto tickets with spare change in your pocket. If you win a jackpot, you’ll become a multimillionaire overnight. If you match some of the numbers of the draw you will win some amount of money. Beware that lottery isn’t an investment rather it is just a game of chance. So, you should only spend few quid when buying lottery tickets.
Now that you know about the avenues and instruments in which you can invest you savings, it’s time that you break your piggy bank, roll your sleeves upwards and get to some serious work. You should only invest part of your savings and keep the remaining amount in bank or invest in risk-free bonds so that you can withdraw the money or liquidate the bonds in a moment’s notice whenever the need arises.