The question is from Meela, 30
I am a female PhD student, doing random part-time jobs and without much prospect of getting a full-time job after I graduate soon, because I am a non-EU citizen without a work permit. I have £45 000 in savings. How can I invest this amount safely, so that I could get an income from it? I keep it in savings account in a bank.
Answer by Karl Lavery CFPTM Chartered MCSI, Manse Capital
I am afraid it is not a good picture. You mention the words ‘ invest this amount safely’. The only safe place to put it is on deposit. But with interest rates typically no better than about 1.5% and inflation of the order of 3%, before you spend a penny, you are losing 1.5% p/y, plus whatever you spend. So the capital is secure but it will be reduced in value by inflation and whatever you are spending. A situation that will become exponentially worse. If you want a better return, then you need to accept some degree of risk with the capital, which is why there is the better potential return but it’s value can fall. So for example, if you are drawing say 3% p/y as an income and you also want the money to maintain its real value against inflation, (say also 3%), then you would need a 6% p/y net of all costs and taxes return on your money. You would need to accept quite a degree of risk on your capital to have the ‘chance’ of securing that and in doing so, you need to be looking at being prepared to invest for a minimum of 5 years, so as to make a reasonable allowance for fluctuating values, which given you are a student here, I suspect you will not be staying that long. Separately, As a non-EU citizen, without a work permit, you may also find that if you are going to invest the monies, then satisfying the Anti-Money Laundering regulations in the UK may be difficult.
Details of a financial planner close to you are available on cisi.org/wayfinder