Why You Need To Invest

The first step in choosing an investment is deciding what you what to achieve. For example, are you saving to provide your kids with money or a better education? Are you investing for your own retirement or just looking to make the most of your money?

Retirement

For most people it is retirement. The State Pension dwindles by the year. The reason is simple economics. In the UK the government taxes the employed and uses that money to pay out pensions. Years ago, everything was tickety boo because there were lots of employed people and relatively few pensioners. However, our population is ageing and the sums simply don't stack up anymore.

In order to relieve the pressure pension increases are now linked to the rate of inflation rather than the rate of earnings growth. The difference is only a couple of per cent, but since the link was broken in the early 1980s that couple of per cent has made a huge difference. The basic State Pension is now worth just £4,000 a year. Therefore, we can't rely on the government to fund us through our twilight years. We have to do that ourselves.

Kids

Don't you wish that you had had a lump sum when you turned 18 or 21 to get started in life? Perhaps you did and now you realise what an enormous difference that made. Investing is most powerful when you start early and you can't invest much earlier than when you are still wearing nappies.

You might want additional funds to give your kids a better education or to pay for university fees. With forethought and planning investing can give you this option.

The Lump Sum

Many of us get a lump sum at some point in our lives. It may come from an inheritance or a bonus. You want to put it to good use but, having never invested such a large amount before, you're at a bit of a loss as to what to do.

We look at the specifics of all three of these situations in a bit more detail in the three guides listed on this page. The rest of this series looks at investing in general.