Long term savings advice please

Loughton_Monkey

There are no short cuts. Many of us are in exactly the same situation.

You simply have to make a 'big' decision first. And that is between two alternatives (or more likely a mix of the two).

1. Put it away in 'savings'. Your capital will be totally safe, and you will have to 'work hard' to keep moving it around to get best rates and returns. But they will generally deliver less than inflation. Hence saving is better than 'under the mattress' but still the value erodes over time.

2. Put it into some form of 'Investment'. Here, your capital will not be safe. History shows that over long periods, your investment will tend to grow much more. But you have to accept the 'volatility'.

In both cases, there are 'tax shelters' (e.g. ISA's) to use, but they don't change the nature of the beast.

If you don't fully get to grips with this 'big' decision, whatever you do next is wrong. Percieved wisdom would tend to suggest that putting 33% to 50% into 'investment' would make a lot of sense if you are wanting the money to help with retirement. Pensions are investments, but carry a burden of limitations on how you take the money.

Deal with this issue first. Then as a secondary issue, start looking for a suitable 'home'. If it is investments, then personally I would stay miles away from a high street bank.

lesley_jane

whats an alternative to a high street bank then?

hounslow_boy

Loughton_Monkey wrote: »

There are no short cuts. Many of us are in exactly the same situation.

You simply have to make a 'big' decision first. And that is between two alternatives (or more likely a mix of the two).

1. Put it away in 'savings'. Your capital will be totally safe, and you will have to 'work hard' to keep moving it around to get best rates and returns. But they will generally deliver less than inflation. Hence saving is better than 'under the mattress' but still the value erodes over time.

2. Put it into some form of 'Investment'. Here, your capital will not be safe. History shows that over long periods, your investment will tend to grow much more. But you have to accept the 'volatility'.

In both cases, there are 'tax shelters' (e.g. ISA's) to use, but they don't change the nature of the beast.

If you don't fully get to grips with this 'big' decision, whatever you do next is wrong. Percieved wisdom would tend to suggest that putting 33% to 50% into 'investment' would make a lot of sense if you are wanting the money to help with retirement. Pensions are investments, but carry a burden of limitations on how you take the money.

Deal with this issue first. Then as a secondary issue, start looking for a suitable 'home'. If it is investments, then personally I would stay miles away from a high street bank.

LJ - you need to understand the difference between nominal value and purchasing power. Nominal value means the face value of your money i.e. it all adds up to £56K. Purchasing power means goods and services that cash will buy you.

I'm a similar age to yourself (and in a similar position *lol) and we both know that in fact the purchasing power of our money has been falling our entire lives. Remember walking into a sweetshop as kids and walking out with a handful of goodies for 10p? What does 10p buy you today? It's just that the gradual drip-drip-drip inflation we saw over the last 30 years is now sharply rising due to Central Banks printing money at a much faster rate.

I don't need to tell you that your cash is buying you less and less of the important stuff you need (food & energy) every week. The value of your cash is being deliberately eroded by the stealth tax called inflation (also known as printing money).

So the statement "Your capital will be totally safe" is only true in nominal terms, in real life your cash sitting there in a bank is losing real purchasing power every month.

So what can you do? I can tell what I did - I opened an account at goldmoney.com and put a significant proportion of my savings into gold and silver. These two metals are traditional inflation hedges and they've served me well the past four years.

Please do your own due diligence, I don't share your gains and I won't share your losses.

Best of luck.

Academic

lesley_jane wrote: »

whats an alternative to a high street bank then?

Two main options:

(1) DIY: you would investigate all the possible fund options yourself at sites like Trustnet or Morningstar and then probaly open a S&S ISA or a SIPP with somebody like Hargreaves Lansdown.

OR

(2) Seek advice from an IFA, so see this site as a starting point or get a recommendation from friends, family, etc.

ChopperST

lesley_jane wrote: »

whats an alternative to a high street bank then?

If you are happy to take a low to medium risk there are the P2P lending sites such as ZOPA / RateSetter / Yes Secure etc.

You basically lend money to people who want to borrow and can acheive rates between 6-8% PA before bad debt and tax. You can lock your money in for between 3 and 5 years.

saverjustice

Be careful out there, recently divorced people should not to lock up the money nor take unnecessary risk.

Jonbvn

saverjustice wrote: »

Be careful out there, recently divorced people should not to lock up the money nor take unnecessary risk.

Surely it depends on their financial circumstances, not whether they are recently divorced or not?

Jake'sGran

lesley_jane wrote: »

whats an alternative to a high street bank then?

Other types of investment including buying shares, funds, fixed rate bonds etc. If you do venture into the stock market you need to keep an eye on how your money is growing...or not.

I started a long time ago when the SID ad was on the radio and TV. I bought all I could of the shares of the well known companies that were being privatised and made a quick profit because they rose in value very quickly - usually due to the big organisations like pension funds etc not being able to buy as many as they wanted.

I now have some very good funds which I have held for a long time. Some of the shares I bought have not done very well and I will sell and buy ones with better prospects.

You do need to do some homework and get to a point where you feel more confident about investing. When it comes to savings, many less well known building societies offer
better rates than High St Banks but please don't bother with Santander. It has a dreadful name.

lisyloo

Surely it depends on their financial circumstances, not whether they are recently divorced or not?

Well it's a very seriously recent life change after 20 years and therefore not a position of stabililty.
lesley_jane admits that she doesn't have much direction at the moment, so it's possible she might meet a new partner and want to settle down, perhaps buy a house or might want to move to another part of the country, emigrate or start a new business.
So I think there is a lot to be said for liquidity at this point in time and I think there is some merit in the comment even if it's not immeidately obvious.

A friend at work has recently divorced.
He was looking for friendship but has recently found a much deeper relationship so at this point I'd suggest anything could happen.
I would certainly recomment not rushing into anything (financially).
Taking a month or two to think about it won't make a huge difference in the scheme of things.