Start retirement saving…Now

A lot of people have put off the idea of investing in the belief they need a lot of money to get started. This simply isn’t true. Most brokers only require you to put as little as £25 a month to work.

It really is amazing what a sum like this can grow to over time. Invest £25 every month for the next 30 years (very roughly the time 40-somethings have before taking retirement) and you’ll end up with just under £50,000, based on achieving an annual return of 10%.

Of course, the return could be lower or higher than this — we can’t say for sure. However, we do know that shares beat all other assets when it comes to growing your wealth over the long term.

Cut costs where you can and simply get started on your retirement pot journey.

Avoid the pre-retirement tax grab

If you want to boost your chances of being rich by retirement time, it makes sense to hang on to as much profit as you can along the way. One way of doing this is to make sure you buy shares within a Stocks and Shares ISA, or Self-Invested Personal Pension (SIPP).

While there are quite a few differences between these accounts, both allow you to shield your gains from the taxman. Nor will you pay any tax on dividends that you may receive from the shares you own. 

This really matters over the long term, because it means more of your money will be allowed to compound. 

Go small

Having opened an ISA and committed to putting some money aside every month, the next step is deciding what to buy. You could take a very general approach and buy a ‘target date’ fund. As it sounds, this invests your money based on when you expect to retire.

Importantly, it adjusts which assets your money is invested in as time ticks by. This means very little maintenance will be required over the 30 years or so that you’ll be invested for.

For those who want to boost their returns, however, you can’t beat buying quality stocks at great prices. Even initially-expensive-looking shares can turn out to be solid investments if a company can keep growing.

Those in their 40s who really want to make big money by retirement age should also consider holding small company stocks, either individually, or within a fund. These firms are more likely to grow faster than larger, more established companies, albeit at greater risk.

Buy the trend

Another way of boosting your savings is to buy into companies that have exposure to major themes such as, say, clean energy, video gaming and biotechnology. These industries have exceptionally bright futures. The earlier you can catch the investment wave, the greater your chance of retiring rich. 

Tapping into these high growth stories doesn’t need to be complicated either. Investment managers, such Blackrock (iShares) and VanEck, offer a huge variety of index funds tracking major investment themes. Importantly, the fees charged for holding these funds are cheap, allowing you to retain more of your profits. 

The post No savings at 40? Here’s how to boost your chances of a richer retirement appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The rate cut, which policymakers hope will bolster the economy in the wake of the coronavirus outbreak, means that UK interest rates are back to their lowest level in history again (the same level that rates were cut to in 2016 after the Brexit vote).

Here, I’ll explain what the drop in interest rates means for UK savers and investors.

Bad news for savers

For savers, the rate cut is definitely bad news. Interest rates on savings accounts and Cash ISAs were already abysmally low (well below the rate of UK inflation in many cases), and they’re now likely to drop lower due to the fact that banks use the BoE base rate as a reference point for saving account rates.

At this stage, it’s still too early to know exactly how much the interest rates on savings accounts will fall by. It may take a few days or even weeks for banks to adjust their rates. However, sooner or later, interest rates on savings products will be lowered, meaning savers will receive a lower return on their money.

Of course, if you’ve a fixed-rate savings product, such as a one- or two-year fixed-rate saving account, you’ll be protected from the rate cut, for now. However, when it comes time to renew your savings term, you’ll most likely find the new interest rate is significantly lower than your previous one.

All things considered, it’s a tough time for UK savers at the moment. If your money is sitting in cash savings earning a pittance, you’re likely to be going backwards financially once you factor in the effects of inflation.

Good news for investors

For stock market investors, however, an interest rate cut is generally good news. There are a few reasons why. For starters, lower interest rates are a positive development for most businesses (not banks) as they lower the cost of borrowing. Lower borrowing costs can boost profits, which, in turn, can boost share prices.

Secondly, when interest rates on savings accounts drop, many people look for alternative ways to boost their wealth. The stock market can be a beneficiary. More money flowing into stocks also tends to push share prices up.

Note that both the FTSE 100 and the FTSE 250 indexes are up today on the back of the rate cut. 

Finally, when interest rates fall, the dividend yields offered by stocks become more valuable. For example, if savings account interest rates drop from 1% to 0.5%, a 3.5% yield from a high-quality FTSE 100 stock such as Unilever suddenly looks even more attractive. Again, this can push share prices higher, due to higher demand for dividend stocks.

So, while today’s BoE interest rate cut is disastrous news for cash savers, it’s not bad news for everyone. If you’re invested in the stock market, there’s a chance you could benefit.

The post Here’s what the BoE interest rate cut means for UK savers and investors appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Edward Sheldon owns shares in Unilever. The Motley Fool UK owns shares of and has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, here’s a look at how to build up a £1m portfolio, starting at 50.

Ramp up your monthly savings

The first thing to do, if your goal is a £1m retirement pot, is to focus on saving as much of your monthly income as possible. Cut down on unnecessary expenses to free up cash flow and aim to pay yourself first every month so that saving is your number one priority. Make no mistake, you will need to save a fair bit of money each month.

Dump the cash savings account

But don’t just save into a regular savings account or a Cash ISA. These kinds of accounts currently offer very low interest rates (less than 1.5% per year) which means they won’t boost your wealth much. Instead, I’d save into a Self-Invested Personal Pension (SIPP) account.

There are two mains reasons I favour this type of account over a savings account. Firstly, through a SIPP you can invest in higher-growth assets such as shares and funds. These kinds of assets are likely to get you to one million way faster than cash savings.

Secondly, every time you save into a SIPP, the government will top up your contribution. This is known as tax relief. Put in £1,000, and the government will top this to £1,250, assuming you’re a basic-rate taxpayer (higher rate taxpayers get an even better deal). This is a fantastic deal which shouldn’t be ignored – it could really turbocharge your savings.

Invest your money

Finally, the most important step is to invest your money so it grows at a high rate over time. Ideally, you want to be generating a return of at least 10% per year on your money.

In order to achieve that kind of return, I would put together a diversified portfolio that’s focused on high-quality growth companies. A global equity fund such as Fundsmith could be a good place to start. It invests in stocks such as Microsoft, PayPal, and Facebook and has returned around 135% over the last five years. 

Individual UK growth companies could also be a good option. Just look at the returns of companies such as IT group Softcat and identity specialist GB Group. Over the last five years, both have generated gains of 300%-plus.

Putting this all together, I calculate that if you saved £1,500 per month from the age of 50, picked up the tax relief from the government, and generated a return of 10% per year on your money, you’d hit one million by 68. 

The key, as always, is to get started as soon as possible.

The post No savings at 50? Here’s how to retire with a million without winning the National Lottery appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Edward Sheldon owns shares in Softcat, GB Group and Microsoft, and has a position in FundsmithTeresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Facebook, Microsoft, and PayPal Holdings. The Motley Fool UK has recommended Softcat and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2020 $97 calls on PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

You have to wonder if it’s worth the effort though.

Shocking interest rates

Ultimately, unless you have hundreds of thousands of pounds to deposit, it’s really not going to make a big difference whether you’re earning 1.3%, 1.4%, or 1.45% on your money. On savings of £10,000, an interest rate of 1.45% gets you interest of just £145 for the year while 1.4% gets you interest of £140. That extra five pounds for the year is hardly going to change your life, is it?

I’ll also point out that if your money is sitting in a Cash ISA or an easy-access savings account earning 1.45%, or so, it’s actually losing purchasing power over time because inflation (rising prices of goods and services) is running at around 2%.

So, in my view, it doesn’t really matter what interest rate you’re getting in the current low-interest-rate environment. The bottom line is that if your money is sitting in cash savings, you’re getting poorer, in real terms, over time.

Much higher returns

The good news however, is if you’re willing to invest your money, as opposed to just saving it, it’s possible to generate much higher returns.

For example, on my Royal Dutch Shell shares, I pick up a dividend yield of around 6% per year – over four times the best Cash ISA rate. Every quarter, I receive a nice little cash payment from Shell, simply for being a shareholder.

Similarly, my Lloyds Banking Group and Legal & General shares also pay me bumper dividends on a regular basis, all for doing nothing. The yield I’m receiving on Lloyds is around 5%, while the one I’m getting on Legal & General is nearly 7%.

At the same time, I’m also picking up some huge capital gains from growth stocks. For example, early last year I bought some shares in sportswear/trainer specialist JD Sports Fashion for around 330p. Today, those shares are worth 770p, meaning I’ve made a return of more than 130% in less than two years.

More recently, I picked up some shares in online fashion retailer ASOS in July, and I’m already sitting on a nice 30% gain. Not bad in less than five months.

Of course, it’s important to be aware of the risks of investing in the stock market. Share prices rise and fall, meaning it’s possible to lose money. Compared to Cash ISAs, or easy-access savings accounts though, stocks are far more powerful as a wealth generator.

Ultimately, if you’re focused on the best Cash ISA rate, or the best easy-access savings account rate, I think you’re missing the wood for the trees.

The post Looking for the best Cash ISA rate? I think you’re missing the wood for the trees! appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Edward Sheldon owns shares in Royal Dutch Shell, Lloyds Banking Group, Legal & General, ASOS and JD Sports Fashion. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Lower rate

When Marcus, which is backed by Wall Street giant Goldman Sachs, first offered its savings account to the UK, it provided a rate of 1.5% AER. That includes a basic rate of 1.35% and a fixed bonus of 0.15% for 12 months. After a year on the market, Marcus has now cut its bonus rate to 0.10%, meaning savers can now only get 1.45%.

This rate drops to 1.35% after 12 months, although you can renew your bonus with the provider by logging into your account and finding the ‘Renew you bonus‘ link.

Following the bonus rate reduction, the Marcus account no longer offers the best interest rate on the market.

The Coventry BS Triple Access Saver pays 1.46% AER variable, 0.01% more than its peer. Although, if you only have a few hundred or thousand pounds to save, TSB’s Classic Plus account, which offers 3% variable interest on up to £1,500, is undoubtedly a better offer. And if you’re willing to lock your money away for a year, some providers offer an interest rate of up to 1.75%.

If this isn’t enough, then I highly recommend looking at the stock market.

Equity income

Investing in stocks is a great way to boost your income stream with dividends if you already have a substantial cash cushion.

For example, the FTSE 100, the UK’s leading blue-chip stock index, currently supports an average dividend yield of 4.5%. You can get access to this income with a simple passive tracker fund which does all of the hard work of investing in the index for you. All you need to do is sit back and watch the money roll in.

Another option could be Vanguard’s FTSE UK Equity Income Index Fund. This fund tracks the performance of the UK Equity Income benchmark. At the time of writing, this offering supports a dividend yield of 5.4%.

The annual management fee charged by Vanguard to manage the portfolio on your behalf is just 0.14%, making it one of the lowest cost equity income fund offerings on the market today.

When combined with a high-interest savings account such as Marcus’ easy access offering, an investment in the stock market can boost the rate of income you receive from your savings without having to take on too much risk.

Boost your returns

I calculate that a £10,000 savings pot split equally between a Marcus savings account and Vanguard’s UK Equity Income passive tracker fund, would generate £340.50 of income every year, more than double the £145 in interest income a saver would receive from the Marcus account alone.

Overall, considering all of the other options on the market, yes, it’s still wise is to hold money in a Marcus savings account right now. However, if you’re looking to substantially increase the level of income you receive on your savings, I highly recommend investing some of it in the stock market.

The post Is it wise to hold money in a Marcus savings account right now? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Rupert Hargreaves owns the FTSE UK Equity Income Index Fund. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Unfortunately, with interest rates where they are at the moment, it won’t be possible to hit this goal with cash savings. 

So, if you want to make £100,000 with just £100 a month, investing in the stock market is your best option.

Investing might seem like a daunting prospect, but today there are plenty of different tools out there that can help you streamline and simplify your investment process. These include robo advisors, online educational resources, and foundation fund lists provided by the big online brokerages. 

Taking risk 

According to data compiled by analysts at investment bank Credit Suisse, over the past 100 years, UK stocks have produced an average annual return of around 5.5% after inflation. 

While past performance figures should never be used as a guide to future returns, the fact that this number was compiled using 100 years of trading data makes it a good benchmark to use to calculate the potential profits equity investors could achieve going forward. 

My figures show that it would take around 27 years of saving £100 a month to build a £100k savings pot at this rate of return (adjusted to include inflation of 2%). 

However, this returns figure is just an average. Some funds have put up a much better performance than the market over the past 10 to 20 years. Funds with international equity exposure have produced particularly compelling performances.

For example, the Scottish Mortage Investment Trust, which focuses on finding the best growth stocks around the world, has returned around 11% per annum for its investors over the past five years. 

At this rate of return, I estimate it would take 21 years of saving £100 a month to build up a rainy-day fund of £100k. 

A framework 

So, that’s how I would turn £100 a month into £100,000. The figures above are just a rough guide and there’s no guarantee they will be replicated going forward. Nevertheless, I believe the numbers show just how easy it is to accumulate a substantial savings pot – if you are putting away a little every month and investing sensibly

The key here is to make sure that you are saving regularly and putting your money to work either in a tracker fund or actively managed investment trust that has a good track record of generating value for shareholders. Buying single stocks isn’t that sensible with just £100 a month because it will be challenging to build a diversified portfolio without incurring huge costs. 

Instead, investment trusts like Scottish Mortgage or passive funds, like an FTSE All-Share tracker will give you access to an instantly diversified portfolio at the click of a button. No extra effort will be required on your part, and most stockbrokers offer a regular investment plan, which costs only a few pounds every month. It’s worth subscribing to this if you’re serious about getting wealthy. 

The post How I’d turn £100 a month into £100k appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

With that in mind, if you’re worried that you might not be saving enough, here are my four tips to help you boost your savings this year.

Open a LISA

The easiest way by far to quickly boost your savings by 25% is to open a Lifetime ISA, or LISA for short.

The government tops up LISA contributions by 25% up to a maximum of £1,000 per year. This means you could potentially boost your savings by 25% in just a few days if you’ve not already opened a LISA for the 2019–20 tax year.

The government bonus is paid monthly and the maximum amount you can save in an ISA every year is just £4,000 (£5,000 including the bonus).

Ditch low-interest accounts

My second tip is to ditch any low-interest savings accounts. If you shop around, there are still some relatively attractive deals on the market for savers.

For example, the First Direct regular saver pays 5% AER fixed for one year, although if you make any withdrawals during the year, the interest rate falls substantially.

If you are looking to make regular withdrawals, the Marcus account pays 1.45%, including a fixed 0.1% bonus for 12 months.

Switch banks

Another great way to boost your savings this year is to switch bank accounts because a handful of banks are currently offering a cash bonus for account switchers.

HSBC and NatWest are offering £175 and £150 respectively. Meanwhile, First Direct is offering £50. That’s excluding any cashback or packaged account offers.

If you switch to HSBC, pick up the £175 bonus, and then put this in a LISA, with the government contribution included, you could boost your savings by £220 with almost no work.

Start investing

My final tip to boost your savings this year is to start investing. With interest rates where they are today, savers have few options when it comes to choosing where to store their money. The stock market offers a great alternative.

For example, at the time of writing, the FTSE 100, the UK’s leading blue-chip index, supports an average dividend yield of 4.5%. Single stocks in the index offer much bigger returns, with some offering dividend yields of as much as 10%.

If you don’t think you would be comfortable investing in stocks, then bonds might be a better option. Bonds are less volatile, but still offer more income than most savings accounts today. According to my research, there are a handful of bond index tracker funds with distribution yields of 3% or more on offer in the current market.

The difference this extra income will make to your savings pot over the long term cannot be understated. According to my figures, £1,000 invested with an interest rate of 1.5% will be worth just £1,162 after 10 years.

The same £1,000 invested in the FTSE 100 with a yield of 4.5% would be worth £1,567 excluding any capital growth. In reality, the FTSE 100 has returned an average of 7% per year over the past decade, including capital growth. Using this rate of return, £1,000 would grow into £2,001 after 10 years.

So, those are my four tips to help you boost your savings this year.

The post 4 ways I plan to boost my savings this year appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Start saving 

Of course, if your goal is to amass a £1m portfolio for retirement starting at 40, you will have to save a fair amount of money each month. For example, assuming you can generate an average return of 8% per year on your money (more on this below), you’d need to save a little under £14,000 per year, or £1,167 per month, to hit the magical £1m mark by age 65.

Many people may struggle to save this much money every month. However, before you give up, be aware that there are clever financial strategies that could help you save this kind of money more easily. 

Savings boost

For example, if you saved into a Self-Invested Personal Pension (SIPP), the government would top up your contributions as a reward for saving for retirement. Basic-rate taxpayers receive ‘tax relief’ of 20% when they contribute to a SIPP, while higher-rate taxpayers can claim an additional 20% tax relief. What this means is that if you’re a basic-rate taxpayer, you’d only have to contribute around £934 yourself per month to save £1,167, while if you’re a higher-rate taxpayer, a £1,167 contribution would only cost you around £700 per month. All of a sudden, that million in retirement is looking more achievable.

Get your money working for you

Now, as I said earlier, my calculations are based on the assumption that you can generate a return of 8% per year on your money. So, how do you achieve this?

Well, one thing is for sure and that is you won’t get that kind of return if your money is sitting in cash savings in a SIPP or any other type of account. You’ll be lucky to receive a return of 1% per year. However, if you were to invest your money in a diversified mix of growth assets such as shares and investment funds, an average 8% annual return over the long run is certainly achievable.

For example, one of my favourite investment funds, Fundsmith, has generated an average annual return of around 21% over the last five years. Another fund that I have invested my pension money in, Lindsell Train Global Equity fund, has delivered annualised returns of around 22% over the last five years. Now, past performance is no guarantee of future performance, of course. However, the takeaway is that these kinds of growth assets can really get your money working hard for you.

Save regularly and boost your wealth by investing in growth assets, and a one million pound retirement portfolio is certainly achievable, even if you’re starting at 40. 

The post No savings at 40? You could still retire a millionaire appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Edward Sheldon has positions in the Fundsmith Equity fund and the Lindsell Train Global Equity fund. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

However, you may recall that the 1.5% interest rate that was originally offered by Marcus actually consisted of two components – there was the standard interest rate of 1.35% and then there was the ‘bonus’ interest rate of 0.15% for the first 12 months. Unfortunately, for those savers who opened an account when it first launched, that 0.15% bonus rate has now expired. But don’t despair – there is a way to boost the interest rate on your Marcus account again.

Renew your bonus interest rate

The good news is that it’s possible to renew your bonus interest rate, although it is now only 0.1% instead of 0.15%.

To do this, all you need to do is login to your Marcus account and select ‘View’ and then ‘Review your savings.’ Then, click on ‘Renew your bonus.’ That’s it! This simple strategy will boost your interest rate back up to 1.45%, which is one of the better interest rates on the market right now.

The truth about 1.45%

Be aware, though, that while an interest rate of 1.45% may be attractive in relation to the interest rates offered by other savings accounts, it’s still an abysmal rate of return. UK inflation has averaged around 1.97% over the last six months, meaning that any money that is only earning 1.45% in a savings account is actually losing purchasing power over time.

Cash savings are useful for short-term goals and emergency cash, of course. But keeping the bulk of your wealth in a cash savings account earning a little over 1% over the long term really isn’t a sensible idea. Your money is likely to lose value in real terms.

Aim for higher returns

If you’re serious about building your wealth, it could be a good idea to put some of your money into growth assets such as shares and investment funds. These assets are higher risk than cash savings (it’s possible to lose money) but the rewards can be far greater, meaning they can really help you boost your savings, and beat inflation, over time.

Here’s a great example: when I wrote about the Marcus savings account this time last year, I suggested that those looking to build their wealth might also want to consider investing in the Lindell Train Global Equity fund in a Stocks & Shares ISA. Fast forward to today, and that particular fund has returned around 14% over the last year – nearly 10 times the return from a Marcus account.

Keeping a little bit of cash in a savings account is always smart. You never know when you’ll need it. However, the bottom line is that for long-term wealth building, growth assets are a far more sensible choice.

The post Have a Marcus savings account? This tip could boost your interest rate! appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Edward Sheldon has a position in the Lindsell Train Global Equity fund. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Having said that, if you’re willing to spend a bit of time researching the best savings account rates on offer, you can find some deals that are relatively attractive. Here’s a look at three top saving account rates I’ve spotted recently.

Marcus by Goldman Sachs

If you’re looking for a savings account that is extremely flexible, the Marcus account could be worth a look. This account currently pays 1.5% AER (which includes a 0.15% bonus for 12 months). The advantages of this account are that it can be opened online and that you can make as many withdrawals as you want without penalty.

Metro Bank 1-Year Fixed-Term Account

If you’re happy to lock your money away for a year, this account could be worth considering. It currently pays an interest rate of 2% AER, which is certainly higher than the interest rates offered on most savings accounts. The minimum deposit is £500 and the maximum is £2m.

The drawback of this account is that it’s less flexible than many other savings accounts as you won’t have access to your funds. However, if you don’t need your money in the next 12 months, it could be a good option.

Virgin Money Regular Saver

Finally, this account currently offers an interest rate of an impressive 3% AER, which is quite high in today’s low-interest-rate environment. And your money is not locked away either as you can access it at any time.

There are two main issues to note with this account. Firstly, you can only save between £1 and £250 per month. Secondly, the account can only be opened in a branch. While these issues may be a little annoying, they’re certainly not deal-breakers.

Interested in higher returns?

Of course, if you’re willing to accept a little risk, there are ways to generate much higher returns on your money. One example is stock market investing. With stocks, you can expect returns of between 6% to 10% per year over the long run.

Stock market investing often gets a bad reputation as it’s generally not well understood. In the short term, stock markets can be volatile, meaning the value of your investments can go down. Novice investors often panic when this happens and they end up losing money.

However, over the long term, stock markets tend to rise. So if you’re in it for the long term, and you don’t panic when markets fall in the short term, the chances are you’ll generate a decent return on your money.

In the past, stocks have generated returns far higher than those from cash savings accounts. Just look at the performance of the Fundsmith Equity fund (a popular investment fund which invests globally) – over the last five years, it has grown at around 23% per year!

The takeaway here is that if you’re looking for higher returns on your money, it could be worth considering stock market investing instead of just keeping all your money in cash savings earning a low rate of return.

Stock market investing is riskier than keeping your money in a savings account, but the rewards can be far greater.

The post Like saving money? I think you’ll love these high-interest savings accounts! appeared first on The Twelfth Magpie.

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Edward Sheldon has a position in the Fundsmith Equity fund. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.