Adjusting Your Savings Strategy During Elevated Inflation
Following last week’s increase in interest rates in the UK, Cash based savings products are worth looking at again. The interest rate tightening cycle is likely to be with us until inflation is on a downward trend. So, what’s a positive side of the current cycle?
Cash rates of return are now more appealing than they have been for many years… meaning if you’re in a position to save, you’ll be getting a better return on your money. Good news in the cost-of-living crisis.
So, what type of accounts are available for consideration?
Types of saving accounts
Each saving account has its own set of limitations and deciding which option is best for you depends on your personal situation.
Here’s an overview of different types of saving accounts and their current average interest rates*:
Easy access savings accounts – withdraw money when you need it, which is great for emergencies. These accounts offer variable rates, which are currently very competitive sitting at around 4 to 4.15%.
Regular savings accounts – usually with your current bank, these can offer good rates but often have limitations (e.g. how much you can save monthly). For existing customers of certain banks, the interest rate is currently at a high of 9%. The average regular savings account interest rate now is between 5 and 5.5%.
Fixed rate bonds – get certainty over how much interest you’ll receive by locking your money into a fixed rate bond for a set amount of time (you pay a penalty fee to remove money early). Current one-year fixed rate bonds are offering up to 5.5%.
Individual Savings Accounts (ISAs) – The Cash ISA variants can be fixed or variable, and as an example, you can currently get an interest rate of 4.75% on a two year fixed rate ISA.
Fixed ISAs are not necessarily always the best option. Flexible easy-access options may give you a higher rate in the future, Campbell Mackie Ltd can provide practical advice in this area.
*interest rates are correct at the time of writing but are always subject to change.
3 steps to check if you can get a better savings return
- Check your current saving interest rates
What interest are you earning (if any) on your savings? The first step is being aware of this for all accounts you hold, as then you can check if a better deal is available.
2. Evaluate your situation and current deals
With a mix of accounts on offer, which option is best for you? It all depends on your personal finance situation and whether you’re likely to need access to your money. Splitting across a mixture of savings accounts could be the best option to offer more flexibility. Another thing to consider is choosing between web-based accounts and opening accounts through traditional banks.
Price comparison websites such as Compare the Market can be a great starting point to see the current options available, including interest rates and terms. If you’d like to review and discuss your options on a one-to-one basis, Campbell Mackie Ltd are here to help.
3. Transfer money and review
Getting a better return on your cash can be simple, especially as many digital savings accounts offer instant set up and transfers from your mobile. Even if you visit your local bank branch, it’s still an easy step to making your money work harder.
When choosing a variable fixed rate, you will want to review the rates regularly to see if the best deal today is still worthwhile in a few months’ time. When choosing a fixed rate ISA or buying premium bonds, you won’t need to review until the end of your term.
It’s always a good idea to stay in the know when it comes to your finances – as they say, look after the pennies and the pounds will look after themselves.
Campbell Mackie Ltd will always give you unbiased financial advice tailored to your situation. Give us a call if you’re looking to review your savings strategy.
Book your free initial consultation: call us on 0141 632 2406 now