In the context of savings, a lump sum refers to a single, large sum of money that is deposited or invested at once, rather than in smaller increments over time.
Lump Sum Example:
For example, let's say you receive an inheritance of £50,000. Instead of depositing it gradually, you decide to invest the entire amount as a lump sum into a savings account.
By doing so, you immediately have a substantial balance of £50,000 in your savings account, which can potentially earn interest over time. Using a lump sum like this can be beneficial if you have a significant amount of money available and want to maximise its growth potential by starting early.
It allows for immediate access to higher interest rates or investment opportunities that may not be available for smaller deposits.