The Biz Whizz

The more you learn, the more you earn

ISAs | 24th August 2018

What is better? Playing it safe with a cash ISA or taking risks with stocks and shares?

Saving money doesn’t need to be dangerous. It seems people would rather risk their money for an adrenaline rush, investing in the first thing they set eyes on, rather than focus on a steady, reliable savings account.

There is no problem with thrill-seeking. In fact, some psychologists suggest that thrill-seeking behaviour can bring people peace and enjoyment. But why extend this behaviour to your money? If you want to take risks, launch yourself out of a plane, swim with sharks, or eat week-old takeaway rice. But, while you’re getting peace of mind from that, your money should be safely tucked away in an ISA, growing from its interest.

The safest and surest way to save is with a simple cash ISA. There will be no surprises there. You get steady, gradual savings over time that you can use to fund any crazy activities you have planned. Or, you could save up for something bigger like a car or a house. There is an option to choose an instant access account where you are free to dip in and out of your savings as you please. You could instead opt for a fixed rate cash ISA, usually with higher interest rates, so you can lock your money away safe from your irresponsible clutches.

Unlike regular savings accounts with your bank, any interest paid on ISA savings, up to the annual limit of £20,000, is tax-free. That’s why so many people prefer to save with ISAs, rather than losing your hard-earned wages to pesky income-tax. It also helps that ISA accounts tend to have higher interest rates than your average savings account. But these can fluctuate with the type of ISA you choose, and where you decide to open an account. To get the best deal possible, it’s always a good idea to compare the various ISAs on offer from different providers.

Often, the highest returns come from stocks and shares ISAs. Different from cash ISAs, these accounts hold investments in stocks and shares which can be sold and bought, within the £20,000 limit, in response to changes in the stock market. It is a faster, more rewarding way to save than a cash ISA.

Investing in a stocks and shares ISA has its risks. It’s a go hard or go home situation. If you’re scared of losing your money, or if you can’t afford to lose any money, it may not be the ISA for you. Changes in the stock market can slash the value of your stocks and shares to a fraction of what they were once worth, and these changes are out of most people’s control. To take advantage of the money there is to be made in a stocks and shares ISA, you will need some smart investment and constant monitoring of your savings. If you can do this, you’ll reap the rewards. For those of us who can accept a little bit of risk for high-returns, stocks and shares ISAs can be a more lucrative and faster way to save than waiting for the slow but steady interest from a cash ISA.

Apples for Oranges is here to help you make the best decisions when it comes to investing in an ISA. There is no one-size-fits-all approach when it comes to finding the right savings approach for you. This is why we spend our time helping you find your perfect ISA.

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