How to save in today’s economy.

The Bank of England has voted to keep the national interest rate at 0.5% yet again. This is all very well and good if you want to try reducing inflation, which is currently running out of control at 4.5% with no sign of slowing down. However, it doesn’t do much good for the millions of people trying to save. According to an article in The Telegraph, during the past 12 months, inflation has reduced the real value of our savings by £57 billion.

However, 60% of UK households can now no longer afford to save, according to new research from Legal and General. Not only does inflation erode our buying power, it also makes it harder for us to put any money aside at the end of the month because every last penny is already eaten up by utility bills, fuel and food.

Plus, the small amount of money people had saved up since the recession is now being used to pay off bills and to try and mediate the effects of inflation. The Legal and General survey found in June 2010 50% of survey respondents were saving money each month; this June the proportion has dropped to 43%.

It is becoming harder and harder to save. Not only because of the reasons mentioned already either. Banks, by and large, are being rather reserved when it comes to savers. The average interest rate on the high street is at an unprecedented low. You may think this is because the Bank of England’s rate is at an all-time low. But before the recession, banks were willing to offer several percent above the base rate; now it’s just one or two percent.

However, some banks are beginning to see the benefit of having a nation of savers. It makes sense for banks, as they have more money to invest and it makes sense for consumers, as they too can benefit from increased returns and greater financial security.

Santander savings rates are some of the best on the market. It has an sSaver account with 3% AER where you can deposit as little as £1 and have instant access. It also has a savings bond, fixed for two years at 3.5% and yet again, you can start saving just £1. Just because you can only put a few Pounds aside each month shouldn’t stop you from saving and making money from it.

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How to take the stress out of banking

Our lives are more stressful now than they have ever been. Rising inflation, high unemployment, pay freezes, a sluggish economy, government spending cuts and continued mistrust in the banking system, it’s no wonder we are all getting grey hairs and wrinkles earlier.

However, much of it we can’t do anything about. Inflation seems to be out of our hands. The Bank of England has maintained the 0.5% base interest, yet again, in an attempt to slow the run away train that is inflation. The economy needs us to spend, but we don’t have the money to do so and unemployment and pay freezes are not in the control of the masses either.

However, in the not too distant future, in fact in two years, the banking system is going to become far more straightforward. The move follows a call from the Independent Commission on Banking to increase competition in the banking sector.

The new project will cost £2 billion, but the result will be a nationwide account database. All banks will have access to it and it will store everyone’s account numbers so we will be able to change current accounts in less than a week. This will mean we won’t have to contact direct debit issuers and inform them we have new banking details, which, seeing as services actually charge for this, is another easy way to save money as well as time.

The best way to save money on your current account is to switch banks regularly. However, only 6% of banking customers transfer their current accounts in any given year. But this means we are all missing out on the many benefits of opening a new account with a new provider. Plus, if we all transferred our accounts regularly the banking system would become more competitive and this competition would force prices down and interest rates up.

Some of the best basic bank accounts on the market at the moment are from Santander. For example, as long as you deposit £1,000 into the account, you can get up to 5% AER and get a nice cheque for £100 simply for switching from your current bank to a Santander basic bank account.

It does seem strange to stick with one bank account for years on end. We regularly switch utility and insurance providers, in fact, 20% of us switch utility providers every year, so why not do the same with your bank account.

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Make ‘Firebreaks’

I meet many people who are frantically busy. They wear their diaries and Filofaxes as badges of honour, proud to be indispensable and wanted by everyone.

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Don’t assume you are the cause of other people’s bad temper

Recently, I was driving along a quiet country lane on a fine day, and was in a good mood. An old friend drove past me at some speed. I just had time to acknowledge him before he was out of sight, but to my slight irritation…

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