The questions on saver’s lips in 2021

10 December 2021

7 minute read

We reveal what customers have been asking us about most frequently during the past 12 months and explore ideas on how to navigate these money matters.

Who’s this for? All investors

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

This year has been packed with uncertainty with the level of Covid cases fluctuating and worries of more lockdowns.

One sure thing, however, has been the appetite to safeguard financial futures and to get savings working harder.

We reveal what customers have been asking us about most frequently during the past 12 months and explore ideas on how to navigate these money matters.

1. What are the alternatives to cash savings which currently offer low interest rates?

Many people feel concerned that they are not getting much back from their savings. Yet it’s important to have a rainy-day savings account with money you can access immediately for meeting unexpected costs.

Once you have an adequate amount saved to cover a new boiler or new set of tyres on the car, it’s sensible to look at ways of making extra savings work harder.

Your money could have greater potential to grow in stock market investments, as long as you can accept the risks that come with investing.

The last couple of years has seen a great number of new starters heading off on their investment journey, and more people choosing to take control of their money by getting invested.

Smart Investor offers an ISA, general investment account and Self-Invested Personal Pension (SIPP) to help investors grow their wealth.

It allows you to choose from thousands of investment funds as well as shares. For those unsure about making their own investment decisions, there’s the Barclays Ready-made Investments (RMI).

2. I have lost money on an investment before and I’m nervous of this happening again

Stock markets don’t move in a straight line which means that the value of your investment will go up and down. When markets fall it’s natural to worry about what that means for the value of your own investments. It might be tempting to sell your holdings, but it’s worth remembering that investing is for the long-term and so short-term fluctuations are part and parcel of investing.

We have been through turbulent times during the pandemic with markets reacting to global lockdowns where airlines grounded planes and retailers, restaurants and hotels shut, for example. But investing is for the long-term and success in the stock market is all about time and patience.

3. Is now a good time to invest?

In an ideal world you invest when the market is low (and shares are cheap) and watch your investments grow as the market rises. However, timing the market is only possible if you have a crystal ball. Even the best brains in the business can’t tell exactly how markets are going to behave. Rather than trying to time your investments, focus on the strategy that what’s crucial is the amount of time you’re in the market.

The longer you’re prepared to stay invested, the greater the chance your investments will have to yield positive returns. That means holding your investments for not less than five years, but preferably much longer. During any long-term investment period, it’s vital not to be distracted by the daily performance of individual investments. Instead stay focused on the bigger picture.

4. I appreciate that investing is for at least five years, but during this time would I be able to access my money or would it be tied up?

Money invested in an ISA, general investment account or SIPP at Barclays is accessible. However, you would need to sell your investment to access the cash, and if markets have fallen you might be selling at a bad time. That’s why we recommend a rainy day account to cover emergency and unexpected expenditure so you’re not forced to sell investments at an unattractive price.

If withdrawing money is unavoidable, the good news is that flexible ISA rules mean that you can withdraw cash from your ISA and pay it back in before the end of the tax year without it affecting your annual £20,000 allowance.

5. I like the sound of the Ready-made Investments from Barclays. How do they work?

For investors that prefer to avoid having to select their own investments it’s worth considering one of these investment funds, which invest across multiple markets, providing diversification.

The Barclays Ready-made Investments (RMI) is a range of five diversified funds which allow you to select the level of risk you’re most comfortable with. Our experts will take care of the rest and ensure the fund continues to be invested in line with its characteristics and stated level of risk.

These multi-asset funds invest in passive funds across a range of asset classes and regions. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.

6. How can I save for my children’s future?

Saving early for your children is a smart move because you can build up a meaningful amount to help pay for further education when they get to the age of 18.

It could also help the mounting challenge young people face of getting on to the housing ladder.

Saving in cash for the longer term doesn’t make sense because inflation will erode the value of the money. Investing is a good long-term strategy for the goal of growing wealth. One benefit is compound growth which is a snowball effect of investing.

For example, you invest £10,000 and it returns 2% income after the first year, so you will see £200 added to your investment pot. In the second year as well as earning returns on your original £10,000, you also earn on the £200 growth. Should the rate of return remain at 2%, your investment of £10,200 would grow by £204 of income the next year giving a total of £10,404.

In subsequent years, the same formula applies, meaning your money grows at a faster rate by leaving the income invested.

Our figures are based on the market rising over the years, which is not guaranteed and your original investment could fall in value.

A general investment account can be opened for a child. Alternatively, you can consider a Junior ISA which gives a tax-free allowance of £9,000 a year. The money stays locked away until the child reaches 18 and earnings are tax-free.

7. Do I need a will? What would happen to my investments if I were to pass away?

Making a will is one of those things that many people put off. But a will is an important way to protect your family and other loved ones.

Writing a will ensures your assets and possessions are passed on to the people you choose. It is one of the most important documents to have when it comes to preserving the long-term financial security of your family.

When a person dies without leaving a valid will, their assets must be distributed according to specific rules. These are called the rules of intestacy and a person who dies without leaving a will is said to have died intestate. This means your estate will be distributed according to these laws – which state that only married or civil partners and some other close relatives can inherit – and not your wishes.

Writing a will can also save on Inheritance Tax as well as spell out your wishes.

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