Can I invest and still have easy access to my money?

I’d like to start investing, but I don’t want to lock my money away for years. I’m freelance so my income isn’t always predictable - some months are great, others not so much. I’ve saved up about £10,000 and I want it to grow, but I still need the option to get at it if something unexpected comes up. Is there a way to invest without losing that flexibility?

That’s a great achievement to have saved £10,000 and even better to be thinking of how to help it grow. The balance between accessibility and growth potential can be tricky, especially when working freelance, due to the variable and unpredictable nature of earnings.

Investing money for potentially higher returns doesn’t necessarily mean “locking” money away for years, although generally speaking, that’s not a bad mindset to adopt. The nature of investing means that in return for higher growth potential, you accept a degree of short-term volatility.

For that reason, it’s best to avoid being forced to cash in your investments at a time when valuations are down. Retaining access to an ‘emergency fund’ is a key building block in the investment process, as this will provide money to fall back on if circumstances change, or if an unexpected bill comes along. This is where it makes sense to retain an emergency fund of 3 to 6 months’ worth of expenses, probably edging more towards the 6 months as a freelancer. So the savings you have already built up could be used for this purpose.

But... with that security comes reduced potential for growth. Fortunately, we’re still in a rather unusual position where interest rates on many savings accounts are higher than the rate of inflationTerm used to describe how quickly the prices of goods and services is rising over a period of time. In periods of high inflation, prices are increasing rapidly, whereas low inflation means prices are increasing by only a small amount., so some growth in real terms is still possible, at least in the short to medium term.

Perhaps now that you have built up a good savings buffer, you could consider investing smaller amounts on a regular basis going forward, rather than setting aside the £10,000. Getting into the habit of regular investments can help you benefit from pound cost averaging, whilst retaining an emergency fund for peace of mind and safety. And if you feel able to commit to a minimum monthly amount, this could easily be topped up in the great months.

The power of investing really starts to take hold over the long term, when good habits and patience combine with the effects of compoundingWhen you earn interest not just on your original savings, but also on the interest you've already earned. It's like earning interest on your interest. Over time, this creates a snowball effect and is one of the most compelling arguments for long-term investing. While it's often explained using interest on cash savings, compounding also applies to investment gains like dividends and capital growth. over many years. There are many great investment apps that provide this flexibility nowadays, rather than needing to lock into a long-term, one-off decision.