Have £100 to save this payday? Here are 3 smart things you could do with that money

Have a little bit of spare money this payday? Here are three clever moves you could make which don’t involve spending the money at the pub.

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Today is the last Friday of the month, which for many people means one thing – payday! Have a little bit of extra money to put aside this month and wondering what to do with it? Here are three smart moves you could make. 

Pick up extra interest

If you’re saving for a short-term goal, such as a holiday, a wedding, or perhaps even a house deposit (assuming you’re looking to buy in the near future) it makes sense to keep your money in a cash savings account. With a savings account, there’s no chance of losing money, assuming the provider is covered by the Financial Services Compensation Scheme (FSCS).

While bank account interest rates are still quite low at the moment, there are some relatively good deals around if you’re willing to do a little bit of research. For example, Virgin Money’s ‘Regular Saver’ account currently offers an interest rate of 3% AER – over twice the average Cash ISA rate. You can open one of these accounts with just £1 and access your money at any time, however, you do have to open the account in a branch. Additionally, you can only save between £1 and £250 per month into the account.

Start investing 

If your savings goals are longer-term in nature, it could make sense to put your money into a Stocks & Shares ISA and start investing. This type of account gives you access to a wide range of stocks and funds, and all the gains you make over time will be tax-free. The real benefit of this account though is its flexibility – you don’t have to lock your money away for a period of time.

These days, you can start investing within a Stocks & Shares ISA with very small amounts of money. For example, with online broker Hargreaves Lansdown, the minimum starting lump sum for investment funds is just £100. What this means is that with just £100 to play with you could potentially invest in the top-performing Fundsmith Equity fund – a global equity fund that has turned £1,000 into nearly £1,700 in just three years – or plenty of other top funds. While past performance is no guarantee of future performance, funds like this can be an excellent way to grow your wealth. 

Save for retirement

Finally, if you’re happy to save for retirement (which is always a smart idea) consider putting your money into a Self-Invested Personal Pension (SIPP) account. The big advantage of this kind of account is that the government will top up your contributions. So, for example, if you’re a basic-rate taxpayer, and you put £100 into a SIPP, the government will add in £25 for you taking your total contribution to £125.

Like the Stocks & Shares ISA, the SIPP allows you to hold a broad range of investments and your gains are tax-free. However, be aware that you can’t access your money until you turn 55 and even then you can only withdraw 25% of it tax-free.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Hargreaves Lansdown and has a position in the Fundsmith Equity fund. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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