This post may contain affiliate links, which means I may receive a commission at no extra cost to you.
Today on the blog I’d like to welcome the lovely Dr Nikki Ramskill, who’s here to talk to us about investing. It’s something that we all should be considering – pensions are not what they used to be and so many of us haven’t even considered what we’re going to do about money when we come to retirement age. As for me – I’m not currently employed and a pension that I could live on is so far out of reach right now that I definitely need to begin planning for my future. I’m not too clued up when it comes to the world of investments either, so this is a welcome post! Thanks Nikki, over to you! 🙂
Firstly I want to say thank you to Miss Penny Money for inviting me to write to you today. But who am I? My name is Dr Nikki Ramskill and I am an NHS doctor with a specialist interest in how money affects my patients.
Money can be the difference between taking a longer maternity leave and having to go back after 3 months because it is no longer sustainable.
It’s the difference between being able to take time off of work to recover from illness or not.
Having money is the difference between a decent retirement or a poor one.
I believe that without your money being sorted, you can never be truly healthy, because like it or not, money is involved in EVERYTHING we do.
So today I wanted to talk about how you can set up your retirement savings for success. In my view, if you are serious about your financial future, and want to retire one day with a decent income, then you MUST learn how to invest.
Before you switch off or dismiss me, I want you to understand that EVERYONE can start investing, in fact, you ALREADY DO if you have a workplace pension (because investing in stocks and shares is how your retirement money grows in value).
You don’t have to wait until you’re at a certain stage of your career, or until your kids are grown up, or until you’ve cleared all your debt. As long as you can meet your minimum repayments and you don’t have serious debts like housing arrears and you can afford to feed yourself and your family, then you can start investing today.
What is investing?
Investing is different from saving because you are putting your money into a business or a venture that has the potential to make you more money than you would if you simply saved it. To get an interest rate of 5% in some accounts, you need to commit a minimum sum of money for a year, and then be vigilant and move the money once the term is up to continue getting a high savings rate otherwise it reverts to a really low level again.
With investing, there are no guarantees on how much money you’ll get back. Often it will do much better than 5%, and sometimes it will do much worse. This is the bit that freaks people out – the chance of losing money. They’d much rather be safe with a guaranteed return in a savings account.
But this in itself is risky too.
The reason it is risky is because when money is left in a savings account, inflation will eat away at it’s value. You have to make sure that your money is ALWAYS growing above inflation. In 2017, the inflation rate was around 2%. If your money is growing at 5%, with inflation it actually only grew by 3% (because inflation reduced its power by 2%). If your money isn’t growing at all, then it just lost 2% in value. To put it another way, look at how much £100 would have bought you 100 years ago. It was worth over £5,000 back then! Now it will barely buy you dinner for 2 in some restaurants.
Investing is one of the ways you can beat inflation.
Ok, So I Know I Need To Invest, But How Do I Do It?
The beauty with investing is that there are so many things you could invest in. You don’t need huge amounts of cash and you certainly don’t need to read the financial times every day!
If you have very limited money (less than £25 per month)
The options for investing with small amounts of money are less than they would be if you had lots of money, but it is still possible. The way you do it is by downloading an app! I have two favourites. The first is called plum. This is a “robot butler” you download onto facebook messenger which helps you to save money by automatically pulling small amounts of money from your account every few days. It only saves what it thinks you can afford to. The little bits soon add up, and I have mine as a holiday fund. Unfortunately the savings account doesn’t give you any interest.
However, plum does give you the opportunity to invest with the money it saves for you. They have had an option to put your money into peer-to-peer lending with ratesetter for sometime now, and this will get you an average return of 2-3%. The next exciting phase in their development is the ability to invest in stocks and shares. You can open a general investing account, or an ISA from as little as £1, and then pick from their list of funds to put it into. They have basic and advanced fund groups such as “ethical”, “emerging markets” and “tech”. If you want in, sign up to plum and then join the waiting list.
My second favourite is MoneyBox. Once you have this app downloaded onto your phone and linked to your bank account, it will start “skimming” the pennies in your transactions. For example, if you just paid £35.95 for your mobile phone bill, the app will take the 5p and put it into your investing account. It soon adds up if you do this will all your transactions. It allows you to open a general investing account, an ISA or a LISA.
Now plum and moneybox are not the cheapest platforms to use. This is unfortunately the price you pay for investing small amounts. It’s not fair, but it’s a good option until you can free up, or earn more money to go to the next level of investing.
If you have at least £25 per month
We’re now into territory where you can invest with brokers like Hargreaves Lansdown, AJ Bell and Vanguard. You’re looking for companies that will basically allow you to set up a direct debit of a minimum of £25 to invest in a fund of your choice. Most will give you option of an opening an ISA, LISA, SIPP, Junior ISA and a general investing account. It takes a little bit more involvement from you to know what to invest in though. My favourite type of investment is called an index tracker fund, and there are tonnes of options out there!
If you’re going to use this for retirement, then you need to learn how to pick the right funds to minimise your fees so that you keep more of your money. Every platform has a different arrangement of fees so you need to do your homework with this! I have a guide on index trackers if you want to read more about it.
If you have thousands of pounds to invest
How exciting!! The world really is your oyster! But be very wary. If someone unscrupulous finds out that you have money, you can be scammed out of it quicker than you can say “show me the money”. With great wealth comes great responsibility, and for you, learning how to properly invest your money is of utmost importance. Yes you could just turn it over to a financial adviser, but before you do, ideally you need to know what they are getting up to so you can keep an eye on it.
Learning the basics of investing will stand you in good stead. Then after that, you could learn how to invest in property or other people’s businesses (or even start your own!). There are so many options it can feel overwhelming. Dip your toe in before going full out though, and make sure all your emergency fund savings goals are met first.
I hope that you can see that investing is not scary, it’s not exclusive to the rich, and you can almost certainly get involved today if you wanted to. I have a lovely community of people who are learning how to invest in the stock market and who are already taking action to get their money working hard for them. You can join them too! Check out my “Beginner’s Guide To Investing” course for more information.
To readers of this blog post, I have a special coupon for £49.25 off the price of the course. All you do is use the code MISSPENNYMONEY at the checkout. There is a 14 day money back guarantee so if you change your mind before 2 weeks and decide it’s not for you, then you haven’t lost anything.
I hope to see you in there!
Dr Nikki x
What a great post, thank you so much Dr. Nikki for sharing your insight and advice with us here. I’m now off to download Plum and MoneyBox! If you haven’t checked out the course via the link above, please do so – because it’s not just about investing your money, it’s investing in your future. ~ Miss Penny.