Investing: How to get started and make your money work for the future

Martin Lewis says there is a 'sliver of hope' for savers

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Investing into anything can be a big risk, especially without knowledge of where to put your money, when to put it there and the downfalls that could arise. Being able to make your money work and grow for the future is a life skill that one should aim for so it’s important to ensure they have the necessary information to at least start the investment process.

Pete Matthew from The Meaningful Money podcast gave beginners useful advice to help get started with investing.

He said: “Number one is to pay off your debts and build up your emergency fund first.

“You should be free of bad debt before you begin investing.

“My definition of bad debt is debt which has a high interest rate and is used to buy things which decrease in value e.g., using a credit card to buy a television.”

Having an emergency fund is also essential when investing.

You should have three to six months’ worth of salary saved in a bank account just in case the money in investments does not see a return.

Another piece of advice to check off when thinking of investing is knowing the account one might open.

Mr Matthew said: “There are two main options. They are pension and an ISA- individual savings account.

“Both are very tax efficient and for most of us we just will never need anything else.”

With pensions, the idea is to invest as much as possible now to sustain a person whilst in retirement.

He added: “The Government doesn’t want you to be dependent on benefits in your old age, so they incentivise you to pay into a pension by giving you tax relief. Essential they are giving you free money to pay into a pension. if you pay and £80 HMRC will make it up to £100 and if you’re paying higher rate tax, you’ll get some money off your tax bill as well.

“The only flipside is that you can’t access the money in your pension until you’re at least 55 that age is going to be rising in the future.

The ISA has no incentive to pay in, but the account is tax free and there’s not limits to what you can take out, and when you can.

Attached to this is the Lifetime ISA (LISA), which is another option, this time for people who are saving towards specific goals.

With this choice, individuals do receive an incentive to pay in.

They can get 25 percent added to their investment, up to £4,000 per year.

However, savers should be aware that if they use the money saved in this ISA for anything other than buying their first home or retirement, they could face a penalty.

Mr Matthew continued: “The next step is to choose a platform. This is just an online admin system that can be used to view and organise your investment accounts. The final thing to decide is how much you want to invest and in what fashion. Lump sum or monthly? You need to start investing with a monthly amount that you think you can sustain but will be a bit of a push for you. Don’t be too comfortable.”

A particularly recommended method, and one touched upon by Mr Matthew is multi-asset funding. He explained how it could reduce their risk of investments going down, which many people will be keen to avoid, of course.

Mr Matthew added: “ If you buy a single asset like a single share and it fails you lose everything, but if you hold on to 1000 different assets and one of them fails will you hardly feel it.”

When choosing a platform, an account, and a fund, people should be aware of their risk profiles. However the risk profile may not be established as a person will not know the level of risk they are comfortable with yet when just starting out.

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