What To Do With Savings | 11 Ways To Maximise Growth

Last Updated November 29, 2023 by Davina Kelly

Are you trying to figure out what to do with savings? In this post, I will share some of my top tips.

Knowing what to do with your savings is equally as important as saving itself. The choices you make can determine whether your savings grow or lose buying power.

As someone who saves a lot, I will share some ideas on the best ways to make the most of your savings.

This post is all about what to do with savings.

Saving money can be a hard habit to master. It requires planning and discipline which can be hard with temptation everywhere.

It is so easy to overspend on shopping, entertainment, food, etc. If you have managed to not give into temptation and master the habit of saving well done, that isn’t an easy feat.

Whether you have a lump sum of money or have just started saving you may be wondering what to do with savings.

This is a good question as the actions you take can make a big difference in what happens to the value of your savings. Leaving all of your savings in a regular savings account is an obvious choice, but it isn’t the smart thing to do.

There are a few things to consider when deciding what to do with savings such as growth, development, and future plans. With interest rates continuing to rise, now is a good time to explore all of your options and take advantage of these high rates.

What To Do With Savings – 11 Best Tips

Build an Emergency Fund

Having an emergency fund is the first thing you should do with your savings. This money is a layer of protection so if something comes up that you didn’t plan for, you don’t need to panic.

It can be used to cover your living expenses in case you lose your job or are made redundant. Or if you have any unexpected expenses like a car or home repairs you can use the money to pay for it.

Sometimes things pop up out of nowhere, so you need to be prepared for the unexpected.

I would recommend saving up at least 3 months of living expenses, but if you can have 6 months, that is even better.

Your emergency fund should include all your essential living expenses such as rent, utilities, groceries, etc plus a buffer. The buffer is for unexpected expenses.

These savings can be kept in an easy-access savings account.

Invest In The Stock Market

Investing in the stock market is a smart choice for your savings as this is a way to increase the value.

You can do this by purchasing index funds, ETFs, or individual stocks if you are confident in your knowledge of the stock market.

If you are new to investing and risk-averse, I recommend purchasing index funds or ETFs.

An ETF (exchange-traded fund) in simple terms is a basket of securities containing groups of businesses that operate the same or sell similar products. For example, if you wanted to purchase FinTech (Financial Technology think Monzo) stocks but you weren’t sure which one to buy you could purchase a Fin Tech EFT. This would contain all of the top-performing Fin Tech stocks.

An Index fund is a type of ETF that is constructed to track a specific financial market index. The S&P 500 is a very popular index fund, this index tracks the 500 largest companies in the US. This index fund has an average return of 9% each year, this is the potential growth rate for your savings each year which is amazing.

Both of these are great options as they are diversified which means they minimise risk and they have low fees because they are not actively managed.

If you want to learn more about the stock market and how it works you can read here.

It goes into all of the granular details which is important if you are just getting started with investing.

Invest In Yourself

You could use your savings to invest in yourself. You are your greatest asset so why not use your savings to invest in yourself?

You can do this in some of the following ways.

Buy an Online Course

If there is something you have wanted to learn such as how to start a business a course is the fastest way to do it. You can master your skills and excel from the comfort of your own home at your own pace.

Attend a Conference

If there are people whose message you resonate with and you enjoy learning from, if they have a conference why not use your savings to invest in the in-person experience? You can also meet like-minded people who you can build relationships with in the process.

Buy Books

Books are a low-cost way to invest in yourself and gain valuable knowledge. I enjoy reading self-improvement books as these books go into a lot of detail on the chosen subject and give practical steps on how to implement what you have learned.

You should buy whichever genre of book you prefer, as reading, in general, has many benefits. Benefits such as improved focus, memory, and concentration. It is also a good exercise for your brain.

Pay off Consumer Debt

Paying off consumer debt is a smart thing to do with your savings. Consumer debt refers to debts such as personal loans, credit cards, payday loans, and car loans.

This type of debt comes with high interest rates added on top which can make it harder to pay off.

If you do have consumer debt I would make paying it off a priority. Doing this will give you more money to put to use in other areas and reduce stress, as having debt can be stressful.

Using your savings to do this may seem hard at first, but it will be beneficial in the long run.

I would recommend paying this off as a lump sum if you can. If not you can add the amounts you need to pay each month to your budget so it is part of your payday routine.

Related: How to pay off debt

Put Some In a High-Interest Savings Account

The interest rates on savings accounts are really high at the moment. This is because the government is trying to encourage people to save more and spend less to reduce inflation.

Putting your money in a high-interest savings account is another way to grow your savings. We don’t know how long this will last so you should take advantage while you can.

I would recommend putting your medium-term savings in one of these accounts. This is an amount of money that you won’t need to touch for at least 12 months.

You need to ensure you are comfortable locking this money away for this period as if you pull the money out beforehand you can incur fees.

Start a Business

If there is an idea you have for a business or side hustle you can use your savings to invest in yourself and your idea.

For example, if you have been thinking of starting a YouTube channel you can use the savings to purchase the camera equipment. Or if you want to sell mugs on Etsy you can purchase the mugs and a market research software subscription. Taking this step is a powerful step in the right direction.

Experiences

Using your savings to pay for experiences like travel can be life-changing. Experiences are fleeting, but they can have a lasting impact.

They can give you new perspectives, increase your happiness and uncover passions you didn’t know you had.

You can choose to travel, have a staycation, go to see a show in the theatre or experience fine dining.

It doesn’t have to be expensive, there are cost-effective ways to do it. You can travel off-season, and look for deals and discounts online.

Contribute to Your Pension

The purpose of having a pension is to save for retirement. Most people have a state Pension and I think we should contribute to it as much as we can.

If you already have a pension with your employer you can increase the amount that you contribute. You can choose to do this by matching the amount your employer contributes.

Or you could build a self-invested personal pension (SIPP). Having this alongside your state pension will increase the amount of money you have when you retire. The benefit of a SIPP is that you get to have control over what you invest in. Read here to learn more about SIPPs.

Vanguard has some great options for ready-made SIPP funds that you can invest in. As with all investing you need to do your research so that you fully understand what you are getting into.

Put Some Towards a Future Goal

Having a goal to work towards in life is always a great thing. This will motivate and challenge you in different ways.

You can use your savings to work towards a bigger goal for yourself. For example, if you want to purchase a property in the future you can use the savings to start building up towards the deposit.

If you had $5,000 saved up already and your deposit was $20,000 this can give you a head start. Now you only have $15,000 left to save up. I would recommend having a deadline for when you want to save the deposit and use a budget to help you.

You can calculate how much you need to save each month and include the amount in your monthly budget. Doing this will give you a plan to follow which will simplify the process.

Reaching this big goal will give you a huge sense of accomplishment and also give you the confidence to set even bigger goals for yourself.

Take Advantage of Tax-free Savings Accounts

Here in the UK, we have ISA accounts (Individual savings accounts) which allow us to save up to £20,000 each tax year tax-free. There are 4 different types of ISA accounts. We can use all 4 accounts to save, but they cannot exceed the £20,000 limit. Here are the different types of ISA accounts.

Cash ISA

This is simply the money you save from your income each month. You can open a cash ISA with your chosen bank and use this account to save in a tax-efficient way.

Lifetime ISA

You can use this account to either save for your first property or to save for retirement. To open this account you must be between the ages of 18 and 39.

The maximum you can save in this account is £4,000 each tax year, but you are entitled to a 25% bonus from the government which is amazing! The bonus will be up to a maximum of £1,000 each year.

So if you did decide to save for a property as I suggested for your big goal, you could use this account and benefit from the 25% bonus.

Read here to learn more about how LISA accounts work.

Stocks & Shares ISA

If you did decide to invest in the stock market you could use a stocks and shares ISA and benefit from not having to pay tax on your returns.

What this means is that if you invest some money in the stock market and your investment grows and you choose to realise the gains you will usually need to pay tax on the profit.

For example, if you invested £10,000 in stocks and it grew to £15,000 you would need to pay tax on the $5,000 profit. But if you have used your stocks and shares ISA to invest, you will not need to pay tax on the profit as you are within the £20,000 allowance.

Innovative Finance ISA

This account can be used for peer-to-peer lending or crowdfunding.

All of these accounts are great options, I would recommend taking advantage of them if you can.

If you are not from the UK you can check online to see if you have similar accounts in your country.

Improve your space

You could use your savings to improve your space. Your home is your sanctuary, a place of comfort and peace.

After the events we experienced in 2020, most people spend a lot more time at home. So why not use your savings to make the space as comfortable as possible?

You don’t have to go all out and remodel your home unless you actually want to lol but you can make small changes. Changes such as replacing the coffee table, and buying some plants can change up the whole vibe and make such a big difference.

If you work from home you could buy a new office chair or some desk accessories.

Making small changes to your space can change the energy and inspire you to be more creative which is an all-around win.

Other Things To Do With Savings

Overpay low-interest debt

If you have any other debts that are not high-interest such as student loans or a mortgage you can overpay on them to help pay off the principal loan faster.

Save for annual events

You can use your savings for annual events such as Christmas, birthdays, and any other annual holidays you celebrate and tend to spend more on. You can create savings pots for these events, this way you will be prepared and won’t end up overspending.

Frequently Asked Questions

What To Do With Your Savings To Make Money?

To make money with your savings you need to put it in places where it can grow. The easiest way to do this is by purchasing assets such as stocks and shares or property.

You could buy index funds or ETFs as I mentioned earlier or you could buy individual stocks. When the share price increases your investment will increase in value which will make you money.

You could also make money from interest and dividends. Dividends are a portion of the profits a company pays to its shareholders.

You could build a dividend portfolio and make money through the dividend payments.

If you want to purchase a property but don’t have the money for the deposit just yet, you could purchase a REIT. A REIT is a real estate investment trust, this is essentially a company that owns and operates income-producing real estate. Most of these funds pay dividends, so that is another way to make money from your savings.

Best Place To Save Money and Earn Interest?

The best place to save money and earn interest is with a high-interest savings account.

You could put your short or medium-term savings in one of these savings accounts and earn interest on your savings.

As I mentioned above the interest on savings accounts is currently high so I would take advantage of this.

Best Ways To Save Money?

The best way to save money is to make it a habit. Once you make saving a habit it becomes easy.

You can do this by including the amount of money you want to save each month in your budget. This way you know how much money you need to save so when you get paid you can just transfer the money. I would recommend automating it. You can do this by setting up a standing order for the same amount to leave your current account (checking account in the US) on the same date each month.

I would also recommend having savings pots for each occasion. For example, you could have your emergency fund in one pot, your savings for Christmas and birthdays in another, etc. Having your savings in separate accounts makes it easier to see everything clearly.

Final Thoughts

Saving is the easy part, the hard part is knowing what to do with the money.

I have shared some tips on what to do with savings in this post. These tips cover many different areas such as growing your savings, investing in yourself, and setting goals.

Now you should feel confident about the best places to put your savings.

Have you found these tips helpful? What will you decide to do with your savings now?