Savings: Britons urged to take action as ‘lockdown cash’ could offer important ‘boost’

Martin Lewis compares savings to investing in stocks

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Savings accounts have taken a hit due to the pandemic, with interest rates at shocking lows. With the Bank of England keeping its base rate at 0.1 percent for over a year, a challenging environment has been created for savers. However, it does not have to be all doom and gloom for those who are still hopeful about growing their cash.

New research has shown many more people are turning towards investing as a post-lockdown option to help better their finances. 

A study from Barclays Smart Investor has shown Britons plan to increase their monthly investments by 19 percent, even amid this week’s easing restrictions.

Some 76 percent of those asked plan to continue investing habits, with only four percent of first-time investors giving up once the country reopens. 

Over 2,000 UK investors were asked about their habits and plans for the future.

Investing has often been posited as a solution to less favourable interest rates.

It is important to note that a person may get less back than they originally invested.

However, despite the risk, the returns could be substantial and this is what draws many people to investing over saving. 

Clare Francis, Director of Barclays Smart Investor, said: “Today’s findings show just how much the pandemic has changed our approach to saving and investing. 

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“As new investors flocked to the stock market last year, it was easy to assume that it was just a lockdown hobby, and that many would go back to their old spending habits when the world re-opened.

“The prediction that many will continue or increase the amount they invest going forward is likely driven by a rise in lockdown savings, with the Office for National Statistics reporting that UK household savings are nearing an all-time high.

“If you’ve been lucky enough to boost your savings under lockdown, it’s worth considering whether investing is right for you.

“Over the longer term, stock markets tend to perform better than cash and, while you won’t lose money by leaving everything in a savings account, with interest rates where they are, your spending power could fall because of the impact of rising inflation.”

For those who are considering an investment over cash savings, there are some important considerations to keep in mind.

Firstly, before investment is embarked upon, cash savings must not be abandoned entirely.

Experts suggest approximately three to six months worth of salary should be kept in cash in order to cover short term needs or unexpected costs.

When investing, it is important to consider that this is a long-term endeavour – usually for five years or more.

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This is because markets rise and fall, and Britons do not want to be selling at the least favourable point in the market.

Investment also means diversification, and this is key for reducing risk involved within the endeavour.

Just as the saying goes, putting all of one’s eggs in the same basket can be a dangerous endeavour, and so spreading money out across various companies and regions can help.

When it comes to managing investments, it is important to sit back and take a “buy and hold” approach, Ms Francis explained.

This is because many people can over-trade or check their portfolio too often, which could lead to panicked decisions and becoming overly emotional.

Finally, investing little and often through regular payments is often seen as a good approach.

Just as saving through cash is considered better on a regular basis, so too is investing to a certain extent. 

Automated transfers into an investment account can help with this regularity while still maintaining the aforementioned “buy and hold” approach. 

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