Alternatives to savings accounts

Saving money is an essential part of modern life and without a comfortable buffer, if the worst happens, life can become pretty uncomfortable.

However, if you have sufficient money in the bank and want to think about other ways to use your spare cash, what options are there?

Investing money in the US government is said to be one of the safest ways to make a return, despite the state of the country's economy at the moment. Treasuries – or government bonds – are an investment that can offer either a variable or fixed rate return and offer little risk.

The only downside is that to get the maximum benefit, it is necessary to tie up funds for a long time, with penalties usually enforced for withdrawals before five years.

Individuals willing to consider riskier vehicles could contemplate investing their money; an option that has the potential for great returns but also a very real possibility of losing some or all of the capital laid out.

For this reason, investing is not a suitable choice for everyone and the general advice given is that you should never invest money that would have catastrophic consequences if lost.

There are a huge number of investment options, of which simple purchasing of stocks and shares is the one of the most commonly chosen and certainly the best-known amongst the general public.

However, there are a number of other options which could also be considered, such as forex – the trading in foreign currencies – a market that eclipses conventional stocks and shares and offers the same potential for gains.

Anyone with a significant sum to invest might find real estate a viable alternative, especially with the current property prices at rock bottom and expected to rise as the economy eventually strengthens.

Savers with a particular interest could opt to support a project or invest into funds with a special emphasis, such as eco-friendly schemes or sharia compliant shares.

Those who want to help a charity but do not feel they have the spare cash to make the donation they would like might want to consider helping the cause out by purchasing a bond, if available, or shares.

The credit crunch has meant that borrowing from banks has become far more difficult and alternative means of lending are springing up. Peer to peer is one such enterprise but to be successful, it obviously requires members who are willing to lend as well as borrow.

Applicants are usually thoroughly credit-checked and given a risk rating and lenders can bid against each other to offer the individual a loan at the rate of interest they feel reflects their credit score.

One golden rule of thumb is that if the money is likely to be needed at retirement, it should be moved to a low risk safe haven where it can remain without the danger of falling in value, at least two years proper to when it is likely to be utilized.