If you’re ever fortunate enough to receive a significant sum of money, you’ll want to invest it and make it work as hard as possible. But what if you only want to invest the money for a short period?
Imagine you’ve just sold your house and decide to invest the capital while you search for your new home, but you want to ensure you’ll have instant access to your investment when it’s time to purchase your dream house – no notice period and no early withdrawal fees.
Or maybe your parents have decided to downsize and sell the family home, and want to invest what they’ve earned but still be confident that if anything unexpected happens – i.e. if they need to pay for residential care in the years to come – they’ll be able to withdraw their investment quickly without any red tape or nasty penalties.
Those are just two scenarios, but we’re sure you could think of a lot more.
When you want to invest a large sum of money on a temporary basis, there are plenty of options to consider. But it’s not just the most competitive interest rates you should look for. It’s also vitally important to keep your money protected.
For those who don’t want to take a risk, investing in the stock market is not recommended. Stocks and bonds can be volatile and there is always the possibility that you could end up selling your investment at a loss, especially if you need the money fast.
Ideally, you’ll want your investment to keep pace with inflation, and it’s always a good rule of thumb to hold at least three months’ outgoings in an instant access savings account, in the case of emergencies.
Depending upon the amount of money you want to invest, it may be prudent to divide the sum between several different accounts. The Financial Services Compensation Scheme (FSCS) safeguards deposits of up to £85,000 per bank.
Easy access savings accounts, variable rate ISAs and high-interest current accounts are also worth consideration, although ISAs, cash for the safer option, may not be your best option in the short-term because of their £20,000 annual pay-in limit. For that reason, ISAs are usually best reserved for long-term savings where you can use the Stocks and Shares option.
A high-yield online savings account is another possibility. Online banks don’t have the overheads of their high-street counterparts so tend to offer better interest rates, although be careful because non-UK banks may not be protected by the FSCS.
Another option would be opening a high-yield savings account at the same bank where you hold your current account, giving you the flexibility of easily transferring your funds between your savings and current accounts as and when you need them. You might have to exercise some willpower though!
Alternatively, National Savings and Investment (NS&I) Income Bonds and Direct Saver offer absolute security and don’t have a notice period or withdrawal penalty, but rates can be below the market leaders. Still, if protecting your investment is paramount, they’re highly recommended.
As you can see, there are a lot of choices and variables to consider if you want to make a short-term investment and not encounter costly headaches when you want your investment back again. Before making a decision this important, you should always seek out the very best advice available.
That’s why we are here.
We are one of the very few qualified IFA’s in the country who can offer both Advisory and Discretionary Fund Management services in-house, and who you can trust to hold your hand throughout the entire process. It’s not just our expertise you are getting, it’s the personal service we are renowned for.
And don’t forget, a windfall shouldn’t be a chore. Make sure you set a little aside for some frivolous spending and reward yourself for making some sound financial decisions with the rest of the money!
If you’d like to know more or discuss your options with one of our advisors, don’t hesitate to call us 0n 01638 429975.