New to savings
Saving for the short term or investing for the longer term, find out how your money grows.
Regular savings – however small – will add up. The earlier you start saving, the more money you will have to help you achieve your goals.
Saving tends to be for short-term goals or when you need to get at your money quickly (for example a holiday, birthdays, Christmas or other special occasion, or an emergency such as replacing a household item). You usually put your money into a savings account where it earns interest, without the risk of losing it (short of a bank, building society or credit union getting into serious financial difficulty). You can also save with some supermarkets, local shops or informal Christmas savings schemes, for example using saving cards or schemes where you save for vouchers but, be aware that if things go wrong and the saving scheme collapses, you may lose your money. For more information see Types of savings products.
Investing is for the longer term – if you’re willing to tie up your money and take some risk (have a short-term loss in order to have the opportunity to make a long-term gain) to get a better return. For more information see Investments.
There are many savings accounts around and you don't need to save with your own bank. You can usually get your money out immediately or after a notice period, sometimes 30, 60 or 90 days. Different accounts offer different interest rates and notice periods for withdrawing your money without penalties – see Savings accounts. There are also other options, for example you may consider saving with a credit union or you may wish to use a National Savings and Investments account issued by the government. For more information see Types of savings products.
Alternatively, you may find informal savings schemes from your supermarket or local shops attractive, where you save up for your Christmas shopping or exchange for gift vouchers. But take care because if the savings scheme collapses, you could lose your money. For more information see Types of savings products.
Retirement
Saving for retirement is one of the biggest investments most people make. The most common way to save for retirement is in a pension, where you get tax relief on the money you pay into it – see Pensions.
Other investments
You may want to invest money for a long-term goal, such as your children's university fees.
Investing means tying up your money for some time in products usually linked to the stock market. Their value can go down as well as up. You take calculated risks to increase your chances of getting higher returns on your money, especially over the longer term (money you can afford to tie up for five years or more) – see Investments.
You usually put your money into an account where it earns interest. It grows from interest being added either monthly or yearly; interest added on top of that interest is called ‘compound interest’. Income tax is usually taken off by the bank before you receive it – this is shown on your statement. For more information, see Directgov’s website – see Related links. Some, like cash ISAs (Individual Savings Accounts), let you receive your interest free of income tax. It's worth shopping around to get the best one for you – Compare savings accounts will help you do this.
This can be a slow process and can take many years for your original deposit to grow by very much. You also need to save regularly and not dip into it, if you can help it. Be aware of the impact inflation can have on the value of your savings – see Inflation.
If you use other ways to save, for example saving stamps or schemes, your money doesn't earn any interest, so doesn’t grow – see Types of savings products.
Inflation happens when prices go up throughout an economy. The effect of inflation on your money means that the money you save will buy less each year.
To protect your savings against this, you should look for an after-tax interest rate that is more than the rate of inflation. Or if you want to put your money away for a longer period and are prepared to take the risk that your money could fall in value (as well as rise), you could put some into an investment linked to the stock market. For more information visit Investments.
By law, most financial services firms must get our authorisation before they can do business in the UK. Our Register has information on all authorised firms currently doing business in the UK. The Register includes firms that are UK authorised as well as those authorised in another European Economic Area (EEA) state that also conduct business in the UK.
If you are considering or currently doing business with a firm authorised in another EEA state you may wish to ask for further information from the firm or its UK branch about its complaints and compensation arrangements. This is because the position may differ compared to a UK authorised firm. EEA firms will also be able to provide you with details of the extent of their regulation by us in the UK.
If you do business with a UK branch of a bank authorised in another member state the compensation arrangements will not be the same as FSA-authorised banks based in the UK. The Financial Services Compensation Scheme (FSCS) website has more information about this – see Related links.
