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Things to consider before saving or investing

Review your financial circumstances

Before you commit any money to a savings or investment product, take stock of your financial circumstances. Here's a quick rundown of the kind of things that you should be considering.

Have you paid off your debts?

Interest can rack up surprisingly quickly on any money you owe. This means that the longer you take to pay it off, the more it may cost you. Whether you have a loan, a credit card or a store card, it could make sense to pay off as much as you can as soon as you can.

Do you have a rainy day fund?

You never know when you might need cash in a hurry. What if you lose your job through redundancy? What if your car breaks down? Or your boiler? What if you're offered last minute tickets to see your favourite band in concert? Essential or frivolous, the list of possibilities is endless. You could need money at the drop of a hat for anything.

Because of this, it's a good idea to keep some money in an easy access savings account. It's up to you how much you keep in an emergency fund. Most money experts recommend that you stash an amount equal to roughly three to six months' salary in an account.

Don't forget that over time inflation will reduce what you can buy with your money and what your money will be worth in the future is less than what it is worth today.

Have you got financial protection?

Financial protection is all about making sure that you and your family aren't left high and dry moneywise if the main breadwinner falls ill, loses their job through redundancy, is unable to find work at the same salary, has to rely on benefits or dies.

When a family is hit by illness or death, the last thing they need to worry about is money. Financial protection could help lessen the burden. It ranges from simple life insurance to critical illness cover to income protection.

Have you got your pension sorted out?

Your pension funds are the pot of money that helps see you through your retirement. After you retire, you may have fewer expenses, but you'll still have bills to pay and food to buy. And who wants to spend their retirement gazing at four walls and counting every penny? There could also be long term care needs in old age such as those from residential/nursing homes. It's important to start investing for your life after work as soon as you can. The longer you can invest, the bigger your pension fund could be when you retire.


Investing your money means you’ll be taking some sort of risk – it’s a fundamental part of investing.

Everyone’s different. Some people are happy to take more risks for higher potential rewards, others are more cautious, preferring less potential reward in return for less risk.

Only you can decide how much risk you’re comfortable with. A financial adviser will be able to help you with this. We also give all of our investment funds a risk rating, so you have an idea of how risky they are.

We’ve created a whole separate section on risk, all aimed at helping you better understand risk and your attitude to it. It covers:

  • information on balancing risk, diversification and how it affects your investment
  • our risk profiles to help you consider your own attitude to risk.

Visit our Understanding risk section to find out more.

Work out how much you can afford to invest

Many investments lock you in for a period of time and you may have to pay exit charges if you withdraw your money before a certain time.

You also need to remember the value of investments can move up and down and this means you may get back less than you put in. Some savings products may also tie up your money for a set amount of time.

With that in mind, you should only part with as much money as you can comfortably afford, whether you're investing a lump sum or regular amounts.

Our budget calculator will help you work out how much you can put away. Apart from anything else, it prompts you to think about exactly where your money goes every month.

Even if you find that you can't put away as much as you would like to, the calculator may show you where you can save some money here and there.

Decide what you want from your money

What are your goals? What do you want to use this money for? Are you tucking away a lump sum or are you parting with a regular amount every month? How comfortable are you taking risks with your money?

The answers to all of these questions may help you decide whether to save or invest your money.

If you have a specific goal in mind you may want to give your money the chance to grow. If that’s the case, then an investment may be the way to go. It’s riskier than saving the money, but investing could give you better returns on your money. Remember, investment values can go down as well as up and you might get back less than you paid in. You may also need to be prepared to tie in your investment for a fixed period of time.

If you’re just after a nest egg or you’re not keen on taking any risks with your money, a savings product might suit you better. You’re also more likely to be able to get hold of your money quickly if you need to with a savings product

Shop around

It’s worth doing a bit of research before you decide where to put your money.

Don’t just stick your money in a savings or investment product and assume that it will give you all you need.

Think about your goals and where might be the best place for your money.

Check the interest rates you can get from different providers.

Find out more information about how your money is going to be invested and details of the associated risks and any charges.

Find out for how long you’d be locking your money into a product and whether you can get it back quickly if you need to.

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