Quilter research reveals 25% of over 40s can save more than before the pandemic and almost one in five want to invest

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Research by Quilter, a wealth management and financial advice firm, has found the 25 per cent of over 40s can save more than before the pandemic, but the overwhelming majority (72 per cent) of extra savings is sitting in cash.

Over 40s already hold the vast majority (90 per cent) of the nations savings according to figures from the Office of National Statistics. Average interest rates have plummeted to new lows and are failing to grow money faster than the rate of inflation. This means anyone in this age group who has set aside more cash in a savings account could actually be losing money in real terms, and should instead consider investing.

Investing can be daunting, but it doesn’t need to be and if you are nervous or need help a financial adviser is a great option as they can help you make the most of your money.

Tracy Crookes, financial planner at Quilter has produced a step by step guide for novice investors so they can make the most of their money.

1 Calculate how much to invest

Investing is for the long term and so you should only invest appropriate amounts, keeping funds for short-term goals or a rainy-day in cash. However, money for medium- and long-term plans can be invested. 

Rule of thumb: aim to invest money you will not need for at least five years

2 Shelter the investment from tax

A stocks and shares ISA is a great option for your investments. You have an ISA allowance of £20,000 for this tax year meaning that any growth will be tax free.

Similarly, a pension will give you tax relief, which is money that the government adds to your contribution. Opening a pension will really help in retirement, however you cannot access it until you are 55, rising to 57 in 2028.

There are several apps and platforms that can make it easy and painless to start investing.

Rule of thumb: Try to pick the most tax efficient option that suits the timeframe that you want to invest for

3 Select your investment

There are a lot of different types of investments to choose from, ones that simply mimic a stock market, ones that are actively managed by a professional, funds that have ‘ethical’ investments and many more iterations.

It can be daunting if you’re just getting started, so it’s generally best to look towards what is called a multi-asset fund, whereby your money is pooled with others and invested together in a number of diverse assets.

You can choose your fund based on how much risk you are willing to take, and how much risk you can afford to take. Generally, if you are investing for a longer term and are less reliant on the funds for a certain goal, the more risk you can afford to take.

Rule of thumb: Invest in a multi-asset fund with a risk profile that aligns to your goals with the money

4 Watch out for the pitfalls

In terms of cost you will generally have a few charges associated with your investment such as the place where you hold it and the individual fund costs which are usually charged as a percentage of your overall investment. Costs can vary greatly, so it is wise to shop around.

Be careful of scams. Anything that sounds too good to be true probably is. You can verify the company you are placing your money with on the financial services register: https://register.fca.org.uk/s/

Rule of thumb: Pick your providers carefully, be sure to shop around and verify they are registered

5 Stick to your plan

Investing can be a test of your resolve at times, it is ingrained that markets can go down as well as up. When we hear news of the markets going down it is easy to panic. It is important not to shift your investment around too much and try to time the market.

Investment is for the long term and that is the best way to make the most of your money. Markets will rise and fall but over an extended period of time you will usually make money, but if you dip in and out of investments, it is likely that you will not make as much.

You should cash out when you know that you are approaching the time that you need your money and stick to your investment plan. 

Rule of thumb: Trust and stick with your investment plan.  It’s about time in the markets rather than timing the markets.