Whilst we might be seeing a post BREXIT boom in retail sales, Poundland isn’t yet ready to purchase any of the UK’s High Street banks – but now we have your attention, let’s take a look at where we are right now with regard to savings rates.
A typical deposit account holding £10,000 will now give you 0.01% interest – that’s a staggeringly low £1 a year. Let that sink in for a moment. For most of us, a trip to the High Street branch means having to pay for parking. Assuming you visit the branch just once a year, you will more than likely be running at a loss.
Things don’t look much better for cash ISAs where the rates are slightly more attractive – typically 0.5% – look out for the adverts in branch windows offering 50 times more interest in a cash ISA than the deposit rate offered by the nearby competition.
The latest CPI figure year on year to August 2016 is 0.5% so at least cash ISAs are keeping up, but normal deposit accounts are lagging behind so what can you do?
We have always believe it is important to have some of your savings held in easy-access deposit accounts – for rainy day emergencies and imminent purchases – but for the longer term, it really does pay to consider investing rather than saving.
Yes it’s true that investing carries a degree of risk and it is important to understand that, but at the same time, even with a very low risk investment strategy, there is still the potential to beat inflation and get a better return – whether you are investing to provide a regular income or just need somewhere to let your savings grow over the medium to longer term. So whilst you are busy searching out the cheapest utility providers and keeping an eye out for holiday bargains on the internet, consider the added potential for making your money work harder.
The following graph shows how our most cautious portfolio has performed vs cash deposits and the more volatile FTSE All Share Index over the last three years – producing a return of over 5.5%pa after fund management charges (Past performance is not a guide to future performance).
If you would like to discuss if investing some of your cash is right for you, please contact us >>