With one month left to use up any remaining 2021-22 Isa allowance, and inflation expected to peak at 7% in April, could a stocks and shares Isa provide a good solution for your savings?
All UK adults are entitled to put up to £20,000 into Isas each year, but any remaining part of your that you haven't used by midnight on 5 April will be lost, with a new allowance starting on 6 April.
Interest earned on money held in all types of Isas is tax-free, but cash Isas aren't a great bet at the moment because their interest rates aren't anywhere near the rate of inflation - meaning savings held in them are effectively losing value.
In fact, the average stocks and shares Isa rate was more than 13 times that of cash Isa rates over the past year, according to Moneyfacts.
So could saving into a stocks and shares Isa be a savvy move right now? Which? explains what you need to consider before investing with a stocks and shares Isa, and how to actually do it if you decide to go ahead.
A stocks and shares Isa differs from a cash Isa, in that instead of receiving interest on your cash, you invest it.
Different types of investments come with varying level of - that is, the chance that you could end up with less money than you started with - which is always a chance you take when investing via a stocks and shares Isa.
If your investments grow (when a company you've invested in makes a larger profit, for instance), the growth will remain tax-free if you've invested via an Isa, in much the same way as savings interest is tax-free when it's earned in cash Isas.
This can be a huge financial advantage, as money made from investment growth outside of an Isa wrapper is subject to , plus if you make a profit from selling shares, and will also be added to your overall income tax liability.
We'd advise only investing in a stocks and shares Isa if you have an emergency savings fund that covers three to six months'-worth of everyday expenses set aside in cash. This should be kept in an instant-access account in case of any unexpected outgoings, such as a broken boiler.
Looking at average returns between February 2021 and February 2022, those with cash Isas would have seen interest-based growth of just 0.5%.
Over the same period, stocks and shares Isa investors saw average growth of 6.92%, according to Moneyfacts.
However, investing does come with the risk that you could lose money: companies can go bust, prices can drop and, of course, stock markets can become easily spooked by major world events.
As a rule of thumb, you should aim to hold investment accounts for at least five years in order to hopefully ride out any market dips.
There isn't a surefire way to beat inflation with investments, but there are several strategies that could put you in good stead.
Then there are , which are a halfway house between seeking help from a financial adviser and the full DIY approach of picking your own investments. Commonly, you'll be asked to fill out a questionnaire to gauge your attitude to risk and broad financial goals, and the platform will recommend a tailored portfolio of investment funds for you.
You can also specify if you want your investments to be eco-focused, or just centered on the tech industry, for example.
Popular 'do-it-for-me' providers include the likes of Moneybox, Moneyfarm, Nutmeg, Wealthify and Wealthsimple.
You'd usually expect to see higher returns with investment options that come with a higher level of risk - but, of course, as the investments will be more volatile you're also likely to see bigger dips.
For instance, if you were to opt for a fully managed stocks and shares Isa with Nutmeg, over the last 12 months its lowest-risk portfolio has actually lost money at -1%, while its highest-risk portfolio has grown by 13.7%.
With investment markets reacting to the crisis in Ukraine, drip-feeding is the best way to invest your money right now as it spreads the risk.
For instance, say you want to invest £500 in a certain company's stock. Doing this all in one go means you could end up making your investment just before the stock value drops, which would see your investment lose money.
But if you were to invest £50 a month over 10 months, you might invest a little just before the value drops and lose a little money, but then you'd be able to buy more once the stock value had fallen, and stand a chance of benefitting from the value rising again in future.
If you're lucky enough to have a chunk of money to spare before the Isa allowance runs out next month, many investment platforms will allow you to pay in the sum of cash now, and then gradually drip-feed it into your investments over the next few months.This way, the money will be held in the Isa wrapper, but you'll avoid the risk of making big investments while markets are particularly volatile.
Note that your cash will usually be placed in a holding account while it's waiting to be invested, and won't be earning interest.
Whatever your investment goal, or what's going on with markets, diversification is key to spreading your risk.
This basically means hedging your bets and making sure your investments are spread across different types of investments, different sectors, and different locations around the world.
If you're using an IFA or pre-made investment fund, the diversification side of things should have been sorted for you. But if you're taking on DIY investing, it's something you should think about.
It can be scary to see your investment value fall - especially when you're new to investing - but simply cashing out every time there's a market dip is just about the worst thing you can do.
Market dips happen for a number of reasons, and panic selling when assets are at a low means you'll have to take on the losses and you'll also miss out on any recovery.
IFAs and roboadvisers will usually review or rebalance your portfolio on your behalf - perhaps by moving investments away from struggling markets - but if you're a DIY investor you should aim to review your investments once a year.
Any changes you decide to make should be either based on your personal circumstances (e.g. perhaps your financial goals have changed after having children), or to rebalance your portfolio so that it remains suited to your original financial goals.
This would be the case if, say, riskier investments have risen in value more quickly, meaning your overall investment portfolio is riskier than you want it to be.