Is it even worth looking for the best savings rates for your cash right now?
After all, securing an interest rate that is an extra 0.25% on what you get now is hardly going to make much difference right?
Well actually yes, and there is in fact much more to it than that.
Cash still performs a vital role in any financial plan and overall portfolio. This article explains how to protect your money and get the best savings rates with little effort.
Finding the best savings rates is still important
So let’s start with a chart you are probably all familiar with. Below we have the rate of inflation as measured by the Consumer Price Index vs the Bank of England Base Rate over the last 10 years.
What this shows is that had you left £10,000 in a savings account earning just the base rate you would have lost 15.8% of its purchasing power.
According to the Bank of England, since 2000, the average annual rate of inflation has been 2.8%. This means you need to be earning a return better than this, otherwise you are losing money in real terms.
Nowadays you would find it pretty difficult to find a cash savings account paying you more than 2.8%, especially for easy access or short notice.
But earning a good return on cash at this time is not what it’s about. During times of low interest rates you should be looking to invest money you don’t need for the long term.
Cash savings should be used for the following purposes:
- Money needed in the short term.
- Protecting wealth.
The good thing about cash is that it is more protected when compared to investing in stocks and shares.
Your cash is protected via the Financial Services Compensation Scheme (FSCS) up to £85,000 per UK regulated banking institution. But it’s vital that you don’t hold more than £85,000 with one banking institution as anything above that is not protected. You need to be spreading your cash between multiple banks.
There is no such protection for stocks. If you invest in a company and the company goes bust there may be little chance in getting any of your money back.
So whilst cash savings offer good protection for your wealth, and it’s unlikely you will beat inflation in the short term, it is still important to get the best savings rates you can to limit the damage.
Even if the best savings rates were just 0.25% better than what you were getting now, on a £100,000 over 25 years that could still mean an extra £7,259!
It’s now easy to find the best savings rates
So we know cash savings are still a vital way to protect your short term wealth and that you should still look and find the best savings rates.
But why do so many people not bother?
The main reason is hassle.
Dealing with the traditional high street banks is still a pain. There can be many forms to fill in, hours on the phone and some even still make you visit a branch to switch!
This is why we are really pleased to have established our RTS Cash Management service.
Working with some of the leading providers in this area we are now able to offer some of the best savings rates that you won’t find on the high street and ensure your money is all 100% FSCS protected.
Using some high street names and challenger banks it’s now easy to spread your cash between multiple organisations across multiple different term periods all using one quick and easy online form.
This service is ideal for:
- People who have received a large inheritance.
- Powers of attorney looking after large amounts of cash for their elderly parents.
- Small business owners who have built up a large cash pile for future investment/expansion.
All savers get access to an online portal that allows you to see what cash you have where, and you will receive notifications when money is maturing.
What’s even better is that once your current interest rate ends, you will automatically be notified of the latest best savings rates and can easily switch your money over.
If you would like us to produce a free illustration outlining the rates you could secure right now please contact us with the amounts you want to save and over what notice periods e.g. 6 month, 12 month, 18 month etc.
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.