What should I do with my money?

[Idontlikecheesecake]

I’m currently a student, and since September I’ve managed to save £6400. It’s currently in an NS&I account, but with cost of living increasing, I’m concerned this amount might be devaluing. Is there a fairly safe investment I can put it into that would at least maintain its current value if inflation increases? Due to my student status I wouldn’t be able to buy a property or take out any finance.

Thanks

Cash devalues but it is important to have an emergency fund which stops you taking out debt in the event of an unexpected expense.

Completing your studies is important as that should lead on to having a higher salary. Some of the money you have may be used at some point, such as buying something needed for your course, or going towards travel costs for a work placement.

I would focus on completing your course.

There's no investment or savings account that will guarantee keeping pace with inflation. Look for building societies that pay decent interest rates, eg Coventry or Leeds.

As nannynick says, you need an emergency fund of money that you can access easily. Instant access accounts have poor interest rates - I think NS&I's Direct Saver is paying 0.5% which is a decent rate by today's standards. Is that the account you have already?

You could put some of your money in a fixed rate account (either an ISA or a bond account) as they have higher interest rates, which are fixed for the duration of the account. You have to leave the money in for a fixed time period (usually counted in years, eg either 1, 2, 3 etc years , and the interest rates are higher the longer the duration of the fixed term). With a fixed rate bond you can't access the money before the maturity date (apart from if you die). With an ISA they have to allow you access to the money but they put a penalty on it, eg loss of interest on the amount you withdraw. At the moment the interest paid on fixed rate bonds is higher than on ISAs. For example, with Coventry Building Society a 1-year (actually slightly longer) bond pays 1.2% but an ISA pays 1.05%.

www.coventrybuildingsociety.co.uk/member/savings/fixed-rates.html

If you're able to save some money every month you could also look at a Regular Saving account. These let you put in an amount each month (limited to a maximum amount per month) and pay a higher rate than an instant saving account. The account usually lasts for 12 months (or 24 months in the case of Leeds Building Society) after which the account matures and your money is moved to an instant access account (paying very low interest), but you can stay alert and find a higher paying account to move it to.

Coventry is paying 1.05% (the account lasts 12 months, maximum £500 per month) and Leeds is paying 1% (account lasts 24 months, maximum £250 per month). Rates aren't fixed so might change during the course of the account.

www.coventrybuildingsociety.co.uk/member/product/savings/regular_saver/regular-saver-5.html

www.leedsbuildingsociety.co.uk/savings/regular-saver/regular-saver/

Starting an ISA is a very good idea because you can get tax relief and you can keep adding to it every year. If you are able to save as a student and you plan to keep saving, then keep adding to the ISA and it can end up as a very good sum.

If you plan to keep saving long-term, you might want to invest in stock & shares. Online platforms like Nutmeg would let you put in £50 per month into a tracker that follows the FTSE index. This can go down, but over the long term (5-15 years) it generally does well. And if you put in a little money each month, that helps even out the bumps in share prices. But only do this if you don't need to touch the money for years and if you are confident enough to ignore any dips in the stock market.