There are a lot of people these days that worry about where they should be putting their money in case they lose it. This is something which it is right to be concerned about because losing money could put you in a very difficult situation. There are things that you can do, which will reduce the risk of you losing your money.
Investment versus savings
If people have a lot of spare money then they may invest it in things like stocks and shares. This can give a good return but it is risky. If money is put in a savings account the risks are much lower but the return is also much lower. It is important to understand the differences between savings and investments and then you can decide which will be best for you. When you take out an investment you are buying something with your money and hoping that it will increase in value. This could be anything from a painting or a home to a share of a company. There is a risk that the items that you buy could decrease in value and this could mean that when you want to get your money back and sell those items, you will actually get back less than you paid in. You may also have charges for certain investments, such as money that goes to a fund manager when you buy shares. This could reduce what you get back and may make it more likely that you will not make anything. Normally investments will go up and down in value in the short term but over the long term they are more likely to average out an increase in value. This means that you will need to think about only getting investments if you are going to be able to keep your money in them for a long time as that will secure it better and it is more likely to be safe. Choosing the right investment or the right fund manager can also make a difference but this is not easy to do.
With a savings account you are lending a bank or building society your money. They will then be able to give you a small amount of interest on it. You will be able to get more money if you tie it up for longer, perhaps buying bonds or using a notice account as this will pay out more in interest.
Safe financial institutions
It is understandable that people also want to make sure that they are putting their money in a place that can be trusted. This means that they might want to find out about the reputation of the lender before they hand over any money. It is worth knowing that legally you can get some protection. If the financial institution you are with is UK regulated then you will be covered by the Financial Services Compensation Scheme and you will be able to get protection for your money up to £85,000 per institution, which means if the bank fails you will still get up to £85,000 back under this scheme. Not all financial institutions in the UK are covered in this scheme so you need to check. Also if you have £100,000 spread across several accounts with the same bank, you will only get £85,000 back likewise if you have the money with more than one institution but they trade under the same umbrella such as Halifax and Bank of Scotland. If you have a joint account then you will get twice the cover as you get the £85,000 each.
Spreading the risk
It can also be wise to spread the risk in a number of ways. As explained above if you have a lot of money then spreading it between different financial institutions can be worth it. Even if you have a smaller amount it can be good as well. If the institution does fail, then it will take a while for you to get your money back so having some elsewhere can be handy. You will also find that different places offer different interest rates or if you are investing have different returns and so putting your money with several can help to spread that risk and if one does badly it may be that the other one does not. If you put all of your money into one investment, for example, and it goes down in value significantly, you will lose a lot, but if you put it in several and one loses money, hopefully the others will gain and cancel out that loss. Investment is a risky business anyway and you will need to decide whether you are willing to take that risk or whether you would rather have a lower return but know that the money will be safer.