What to Consider When Starting a Savings Account or Investment Fund

What to Consider When Starting a Savings Account or Investment Fund

Starting an investment or a new savings account is a huge milestone, and one you can feel proud of – however, your financial journey doesn’t just stop there.

Between monthly costs, interest rates, accessibility, and what level of risk you’re willing to take on, there’s a lot to consider – and when you’re set to grow your money and make financial decisions that could affect your future, it’s worthwhile to ask yourself some important questions.

As always, it’s important to remember that we don’t offer financial advice – so it’s important to make sure that you fully understand every financial decision you make. If you do need help, we’ve got some great tips on what you should consider when choosing a financial advisor.

With that being said, let’s consider what you should investigate when starting a savings account or investment fund:

What are the monthly costs involved?

When considering a new investment or opening a new savings account, the first thing that you’ll probably look at is the interest rate per month (and we’ll get to that shortly!) – however, potentially one of the most important things you should consider are the monthly fees and other costs involved.

Unlike interest rates, monthly fees might not be disclosed upfront – leaving you to select an investment or account with a great interest rate, but with a high management fee. Remember – management fees usually deduct from the interest you earn each month; meaning that you will need to recalculate how your investment will perform over time.

How great is the interest?

Different investments will offer different yields (that is, total returns thanks to the interest rate). Usually, most investments and saving accounts will offer a monthly compounded interest rate.

When considering an investment, consider what interest rates are being offered and what that might mean for your investment. In some cases, savings accounts might offer a ‘flexible’ interest rate, where your rate of interest will increase as you either deposit or grow more money in that same account.

How often and easily can you access your money?

Some investments and savings accounts have different options should you need to access your money in the event of an emergency. For example, some savings accounts require a one-month notice period should you want to withdraw any cash, while some investments might see your money ‘locked up’ (that is, you cannot withdraw or spend it) for a number of months or years.

If you aim to invest or save money for a particular goal, make sure that your chosen investment or savings account allows you to withdraw your cash when you eventually do wish to use it.

What are speculative and conservative investments?

If you’re set to make an investment, a great idea is to research and understand more about what it is that you’re investing in. There are several options on the market – such as purchasing stocks, buying commodities (such as gold or silver), or buying to unit trusts, and each carry a different level of risk.

The terms ‘speculative’ and ‘conservative’ are often used when speaking about investments. Each refers to a level of risk – speculative refers to investments where you undertake a large amount of risk with potential for a larger yield - despite standing a higher chance of losing your money if the investment doesn’t work out. Buying stocks or commodities is usually seen as a speculative investment.

‘Conservative’ investments, then, usually involve a lower level of risk and offer smaller returns, but are usually seen as stable in the sense that investors stand a far lower chance of losing their money.

Before making an investment, consider what your needs and goals are, and what level of risk you’re prepared to take on.

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