3 Ways a Lump Sum Investment Can Prepare You For The Future
Lump sum investment. Who needs it? You’d be surprised. We all want to be in a position to be able to look forward to the future. We all want that little peace of mind knowing that everything is in its rightful
and that we can carry on with life knowing that there aren’t going to be any nasty surprises lying around the corner. Unfortunately, as many of you probably already know, life isn’t so simple. Safeguarding your future is a high priority for many up and down the country. If it isn’t, it probably should be.
Money may be tight, but who’s to say it won’t be that little bit tighter a few years down the line? Investing in your future is sensible and can be extremely rewarding providing you do it right. Putting money into various investments can increase your chances of generating a return and increasing your existing capital overall. To invest is a big commitment, especially with a lump sum investment. But for others, it’s a necessary tool to prepare them for the future. Everybody has plans, and everybody wants to make them happen. By investing your money are increasing your chances of being able to fulfil your financial goals for the future. Whilst it’s not a sure-fire way to get rich, investing intelligently could see you landing significant returns, especially if you play your cards right.
1. Owning your 1st home
To own a home is regarded by many as a milestone. To even more it’s seen as an unobtainable pipedream. Why? According to The Guardian (who produced an article earlier in the year), houses these days are so expensive that the IFS believe that for 90% of 25-34-year olds, the average house price can be four times in excess of their annual income tax. Once more, over the past 20 years, the average house price has grown about seven times faster than the average income of a young adult. Sounds like a rough time, right? Well, there are a few ways to get over this potential stumbling block.
If your earnings aren’t quite up to par with the inflated prices of the housing industry (let’s face it- not many peoples are!) it’s worth considering investing as a means to generating a secondary income. This way you can look into building your capital without dipping into your monthly earnings. If you did have a lump sum investment fund in your savings account, but not enough to put down on a house deposit, the miracle that is compound interest could soon see your money where you want it to be.
2. Your retirement
We know, it seems like a long way off, but preparing for the future is as sensible an idea as any. Author Habeeb Akande said it best when he said: “Invest in the future because that is where you are going to spend the rest of your life.”
According to Money’s ultimate guide to retirement, if you start saving at the age of 35, you’ll have to put away 16.6% of your income over a period of 30 years to retire well at the age of 65. Whilst it may seem to be a distant thought in a far-off future, it’ll quickly become a reality. Before you know it, you’ll be free of the shackles of working life, but you’ll have nothing to show for it. According to Saga, to have a comfortable life, you would need at least £21,360 a year. This means that you’d need a pension pot of nearly £400,000, which is nearly double to what the average Brit originally estimated. No surprise that many people are looking to new ways to supplement their existing employer’s contributions to their retirement funds. Utilising a lump sum investment to kick-start your retirement fund is a great way to begin proceedings. By putting aside your existing savings to prepare for your future, you can best position yourself to retire.
3. Using a lump sum investment to support your children’s future
Some of you may not want children. Some of you may already have them. For some of you, they may be nothing more than a glint in your partner’s eye (whether you want them or not). For those who are so inclined, looking to the future can often involve also taking your offspring’s future into account. After all, kids aren’t cheap! With the threat of rising education costs in the UK (especially for top private schools) preparing for your child’s future is becoming more and more commonplace.
In the scenario of investing with your kids, you have one great ally on your side-time. Obviously, the length in time from when your child is born to the time in which they would be able to use the money is going to be quite substantial. As a result of this, (if you start investing early enough), you can invest and earn interest year on year, compound it and let your kids have access to it once the funds have matured (or at least they have!).
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Remember like any investment, there’s a degree of risk to consider. To read more about risk, visit our Risk Warning page.