Savings accounts: When to check them

henrietta oxlade

henrietta oxladeThe plus side of having money in the bank or building society is that you shouldn’t have to worry about it.  You generally know how much return you are getting on your cash (however small), so, other than watching your spending pattern and keeping on top of your budget, there is no need to check the actual performance of your account.

However, when you have money invested in equities – whether it is via your pension fund, ISA fund or unit trust – the value of your fund will go up and down with the stock market.

Clients often ask me how often they should check their savings accounts.  As always, there is never a simple answer.  If you are investing for the long term, then short term fluctuations are of no consequence. It’s a bit like if the value of your property goes down, it doesn’t actually mean anything, unless you happen to be selling it (in which case it means a lot!).

I had a conversation with a client about this yesterday, and she came up with an interesting analogy. We were discussing her long term ISA investment and Pension Plan, and she had been wondering exactly the same thing.

feet on scalesShe wondered if checking up on the value of your investments is a bit like weighing yourself. If you do it every day, there is a danger of becoming obsessed, and overly worried about changes that we all know will happen.  Our weight fluctuates, due to external forces – whether it’s eating just before you’ve weighed yourself, different time of day or what you’re wearing.  Similarly, the stock market fluctuates every minute of the day due to geo-political events, natural disasters, time of year and so on…  But both normally adjust back again.

On the flip side, I observed that by not weighing yourself, things can get out of hand. A year can go by, and you can catch sight of yourself in a shop window, and think “how did that happen?”  It’s the same with your investments – it is very important to review your investments from time to time to ensure that the type of product and the style of fund is still appropriate to your situation.

As always, a balanced approach is best. Long term investments should be reviewed perhaps twice yearly.  As for the scales, I find Thursdays are the best!