What To Do With Your Savings
It’s an interesting time in the UK economy. The cost of living has started to fall sharply, as many (including ourselves) expected it would. With the rise in VAT from January 2011 now leaving the 12-month comparison, the RPI measure of inflation has dropped below 4%.
Now, for the first time in several months, fixed-rate bonds and fixed-rate ISAs are in a position to offer real rates of return. But even so, none of us can be absolutely sure whether this will hold in the medium term. The Bank of England has announced further quantitative easing measures, and opinion between forecasters varies considerably.
This fall in inflation has prompted consumers to think about saving. However, many remain unsure about their best options. Which4U’s new savings guides focus on these savings issues to present the best options. Let’s preview a few of these now:
Saving Grace: How much compensation are you entitled to if a bank fails?
Any ideas? Don’t worry if not. You’re in the majority.
UK savers are protected for up to £85,000 per person per financial institution.
And despite a multi-million-pound television advertising campaign designed to raise awareness about the guaranteed compensation level for savings UK deposits, only 3% of people are aware of the measures at the close of 2011, according to the Financial Services Compensation Scheme (FSCS).
FSCS Advert...? (Nope. Me neither)
Inflation-Linked Savings: Smoke and Mirrors
There have been some significant moves in the market for savings products this week, mostly driven by concerns about inflation.
Santander has looked to muscle into the space vacated by NS&I, who announced a withdrawal of their popular inflation-linked Investment Accounts in November.
Following their self-acclaimed ‘revolutionary’ up-front interest bond, Santander’s Inflation-Linked Savings Bond pays the rise in the Retail Price Index over a six-year period.
“Waste not, want not”: How Much Could You Be Saving?
This may prove an interesting week of parallels. A recent post on our sister site’s Finance Blog in Australia compared details of how fee-driven banking products have come under scrutiny in both countries.
Another area of comparison is to be found in what we might call household efficiency or discipline savings. How much could we be saving by organising our food shopping more carefully to reduce wastage, or by switching off our electrical devices rather than leaving them on standby? Quite a lot, as it happens.
Inflation above 5%. What now for savers and spenders?
Soaring energy bills and rising food prices have driven inflation over 5% in the month of September, causing more misery for savers. The retail price index (RPI) has risen to a 20-year high. So, what now for savers who are set to lose out considerably in real terms?
It has been estimated that savers at the basic level of tax would need to be investing at a rate of at least 6.5% to avoid losing out in real terms, and greater still for higher rate taxpayers. However, the low base rate set by the Monetary Policy Committee to aid growth is leaving very few products available at a percentage that can offset the high inflation rate.
What are the options?
Students Are Urged to Go Through Insurance Policies with a Fine Tooth Comb
Those who have decided to move on to further education by going to university have been warned that their personal possessions may not actually be automatically covered by general annual insurance at their halls of residence.
This is the opinion of the head of consumer finance at Love Money, Ed Bowsher.
Mr Bowsher has urged future scholars to take the time to find out if they are protected before moving into their home-from-home, so as to avoid any potential confusion or unexpected high costs whilst studying.
The expert went on to say that “students should also check their parents’ home insurance policies,” adding that “some policies will cover students even if they’re living away from home” Read more >>
ISAs ‘ideal for cash-strapped savers’ declares expert
By taking the time to analyse the best ISA rates on offer in the UK, is one of the most appealing options available to consumers who are struggling for cash but still want a chance to store funds in a competitive savings accounts.
This is the opinion of the director for independent advisory firm Ark Financial Planning, Phil Perry – who has insisted that it is possible for people without large funds available to them, to plan ahead when it comes to their financial future.
Mr Perry went on to explain that the most suitable products for individuals who have “absolutely no savings whatsoever” are “deposit-based” accounts, as these tend to provide a more flexible way to bank, in terms of allowing the account holder easy access to their money.
“The first port of call would always be an ISA, depending upon the client’s tax position of course. There are many facilities out there these days [where you can] find the best scheme,” noted Mr Perry.
Next years students advised to use gap year to save
With the massive increases in some university fees that are being introduced next year, it is more necessary than ever that students make the most of their money to stop themselves coming out with massive debts.
One spokeswoman for online resource Moneyfacts, believes that those wanting to go on to higher education should consider taking a year out in order to save money in ISAs. She went on to say that, where possible, students should priorities building up savings accounts before embarking on their degree course.
Currently, most British students will be getting prepared to start the 2011/12 academic year which starts in September, and the majority of these will more often than not plan on getting through their time at university on their student loans and in some cases an overdrafts on student accounts.
This can be very hard to do with tuition fees now averaging at the top £9,000 on top of the need to pay for groceries and utilities.
However, taking the advice of the Moneyfacts experts, by planning ahead and saving up for a couple of months prior to your course beginning, students can provide themselves with a strong financial safety net that could help them to avoid serious financial debt on completing their course.
Read more >>
Choosing the right savings account
Regularly putting money away into savings can be hard enough without worrying about scour savings market in order to find a account that offers the best interest rates.
UK interest rates have been kept at the record low of 0.5% since March 2010 and there are no signs that it will improve any time soon.
This means that banks are continuing to struggle to offer savers a decent rate on their savings.
However, despite the low base rate there are ways in which savers can boost the earnings from their surplus funds, some adding in the element of risk.
Tax Free Savings Accounts
Some people may be surprised learn that the earnings made from the interest paid on savings accounts and investments is taxed.
The income tax percentages depends on your annual earnings, but can be up to 50% which means you would be losing half of any returns to the tax-man. Read more >>
Don’t allow your savings to be eroded by inflation
After the recession brought big concerns to the safety of our money, the government increased the amount of cover individuals were given in order to restore some confidence in savers.
But nowadays there’s a much more obscure danger that our savings face, with the value of our funds falling from under our very noses.
With the lowest interest rates on record and an unusually high rate of inflation, savers are struggling to stop their funds from losing value. Inflation measures the rate at which the cost of things is increasing, and therefore if you fail to get a higher savings rate than the current inflation rate, your money won’t be worth as much in years to come. Read more >>