An investment company has warned against seven myths about savings and investments following a study into how the UK feels about finance.
Around a third (32%) of people who have not invested before said that choice is because it’s ‘too risky’ to make money on, according to Hargreaves Lansdown.
A further 7% believe they are too old to start investing, while 2% of the 2,000 respondents think they are too young. As well as investments, there was scepticism among those surveyed about changing their savings provider.
Over a quarter (27%) haven’t switched their funds because they trust their bank, while under a fifth (17%) opted against changing because they think it is too much hassle.
Meanwhile, when it comes to current accounts, people are more likely to split up from their partner than switch their bank account.
The reluctance of savers or potential investors to explore new opportunities also arose in a recent study by Canada Life. It found over a fifth of UK adults would turn down professional financial advice, even if it was free. Reasons included a lack of trust and a fear of advisors’ ‘pushy techniques’.
‘Awful lot of people’ grow up with misinformation about money
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “An awful lot of people have grown up thinking money is so complicated that they don’t even dare try to get to grips with it. Not only can this mean they don’t make the most of their money, but there’s also a risk they build up myths and misunderstandings that can cost them dear.”
Misconceptions about investments or savings means millions of people could be missing out on thousands of pounds. So, to address the knowledge gap, Hargreaves Lansdown has outlined seven financial myths. They are:
Seven myths that blight the UK’s money-making
- I’ll never understand money
Some money matters are easier than others, so when you’re trying to understand something that takes a bit more time, it’s easy to give up and think you’ll never get it. However, resigning yourself to being in the dark is an expensive business.
You don’t need to be an expert. The key is just to ask a few questions and start building your understanding.
- It’s too much hassle to make the most of my money
You can make life much easier for yourself by closing old accounts and bringing your money together in one place. That way, you can keep an eye on things and switch far more easily.
It’s a useful approach for everything from savings and investments to pensions. However, it’s always worth making sure you’re not losing any valuable benefits by moving, or paying hefty charges.
- Loyalty makes a difference
Suspicion of newer online accounts is costing savers dear. If you have £20,000 in savings, putting it in a competitive easy access online account with no withdrawal restrictions, paying 5.15%, for a year would leave you £674 better off than putting it in an average high street branch account paying 1.89%.
- Investment is risky and savings are safe
Thinking around risk can be faulty when it comes to saving and investing. People tend to think of savings as safe, because they overlook the risk that inflation poses to the value of their cash, and the fact that even though they may walk away with a larger lump sum, it could have less buying power than when they started.
As part of the research, people were asked what would happen to their spending power if inflation was at 6% and their savings at 3%, and a fifth said it wouldn’t damage their spending power.
- I’m the wrong sort of person
One common assumption is that all investors are committed and passionate, and spend their lives delving into the balance sheets of individual companies and reading up on yield curves.
If you want it to be your hobby, it can be. However, if you want to watch a video or read a short guide to the basics, and opt for a diversified fund, you can get started in an hour or so.
- You have to time things perfectly
The problem with waiting for rates to rise, is that you won’t know the moment it makes most sense to save or invest until it has already passed, and then you’ll have missed out on the growth in the interim. For savings, the usual rule of thumb is to opt for the highest rate on the type of account that suits your circumstances right now, and benefit from better rates today. You can remove the timing risk from investments by making regular payments into a stocks and shares ISA.
- Things will go wrong if I make a change
The good news is that rules have been designed to protect you. The Current Account Switch Service means you can pick your own switching date, your new bank will set up your account so incoming payments and things like direct debits automatically move over. Your bank has to complete the switch in seven days, and if anything does go wrong, your new bank will refund any charges or missed interest.”
