Savings versus high return investments: The facts

For those of us lucky enough to have savings for a rainy day, it's important that the real value of our cash sum doesn't diminish because of inflation. Unfortunately, this appears to be a problem for many consumers, especially with interest rates being held at 0.5 per cent dampening the incentive to save. With the Bank of England pondering a further dramatic cut to 0.25 per cent for the first time in history, or holding current rates until May 2012, savvy savers will be exploring the other financial options available to them.

High return investments could enhance your money

Many companies offer consumers with a large amount of savings to participate in exciting business opportunities that have enjoyed a strong past performance. Although growth in the fund doesn't come guaranteed, the potential to add precious digits to your savings is tempting.

Some recent high-return investment prospects from leading companies have included the chance to place a minimum of £40,000 into a student property complex. This proposal therefore suits individuals who are saving for a child's education, a pension for later life, or for the down payment on a mortgage. With typical returns of eight to 12 per cent, this could mean that a profit of £4,800 is earned over just 12 months.

Alternatively, for savers with a strong net worth, property joint ventures can offer even greater dividends, adding 15 per cent to the initial investment amount. The eligibility criteria for this venture are simple: you must have at least £100,000, and it is essential that your capital remains in the investment for the full term agreed when contracts are signed.

Don't be deterred if you would prefer to invest less into these investment opportunities at first. One venture into leisure resorts overseas is open to consumers with £1,000 of capital, and an outstanding return of 26 per cent is possible.

Savings can offer tax-free interest and peace of mind

No matter how much you compare savings accounts, that can guarantee growth of 25 per cent over a one-year timeframe, the AER that a bank account advertises will be guaranteed if you do not withdraw your money early and remain a customer for the full term you signed up for.

Tax-free ISAs are also available for up to £5,340 of your cash in 2011-12.

Remember: many high-return investments are also accompanied by risk, and you may not see any profit for many years after your initial financial acquisition. Meanwhile, a savings account can provide monthly or annual interest payments, allowing your cash to grow before your very eyes.

To compensate for the disappointing interest rates in today's market, many banks will offer preferential rates to existing customers. Other banks will also provide a higher level of interest for the first three or six months after your account is opened too, just to sweeten the deal.

Remember: you need to be sensible with how you use your savings. Many of us spend a lifetime building up our assets, and so this decision shouldn't be taken lightly.