Should I save my money in one place or spread it across investments?

28 August 2019

Q

I’m 24 and I’d like to start saving £400 a month. Where should I put the money? Should it be all in the same place or should I split it across different investments?

From
FR/London

A

The correct answer to your question relies entirely on your current financial position and what you hope might happen in your life over the next 10 years.

The first step is to make sure you have enough money held in an easy access cash account for emergencies.

As a general rule, ensure that you keep at least three months’ living expenses and enough capital to cover any known larger expenses (such as upcoming car or holiday expenses) in an easily accessible deposit account. A high-interest paying current account like the one from TSB’s Classic Plus account (which pays 3% per annum gross interest on up to £1,500) might work well for this. For any surplus capital funds, I’d suggest taking a look at the online Marcus deposit account, which is paying 1.5% gross.

Once that’s in hand, if you are yet to buy your first home (but intend to be a property owner in due course) consider opening up a Lifetime Isa, (Lisa). You can save up to £4,000 per tax year into a Lisa and if you do, the HMRC will add another £1,000 (25%) to your account.

If you decide to save the maximum £333.33 per month into a Lisa, you could add the remaining £66.67 per month to your emergency fund.

Alternatively, if you are happy investing in the stock market for five years or more, you could put that extra money into an Investment Isa with a different provider. You can contribute up to an extra £16,000 (2019/2020) into an additional Investment Isa that can be used for long-term growth, but you can also get access to the funds should you need it.