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How to save in today’s economy.
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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.
