We have all watched the economic crisis unfold. We all watched the banks take major strain and some of them collapse and we all stood by holding our breath wondering if our savings were about to disappear into thin air. Now that the economic climate has stabilized somewhat things have not improved substantially for people wanting to start squirreling their acorns away.
Low, low interest rates
With all time low interest returns of 0.5% on savings for the past 50 months (Bank of England) there is little to no growth to any money that you put aside and you might as well just keep it in a box at the back of your cupboard. To compound the problem the inflation rate has risen to 2.8%, so, in effect saving becomes pointless. In actual fact the banks and the government would rather have us spend, spend, spend.
To put it frankly the banks are basically trying to boost the economy by giving the nation an incentive to take their savings out of the banks and spend it now.
What do we do about this problem? How do we save? On the whole we need to think long-term. Pensions, old age, university fees for the kids, mortgages. There are thousands of people that are thinking about just these problems and want to secure that long term individual savings account.
Get rid of debt
Here are the things that you can do to help yourself along. First of all get rid of all expensive debts. Things like shop account cards, and credit cards, charge interest rates well above any interest rate you would get on a savings account. Focus on debts that may be worthwhile, like a mortgage that will be beneficial to you in the end. Look carefully into stocks and shares and invest wisely and as risk free as possible. Invest in large and stable companies. Currently record market highs can pay you dividends of up to 4%.
Another interesting method to keep your savings growing is to keep your money on the go. Banks introduce ‘teaser’ introductory offers to get you to open a bank account with their establishment and this usually includes a higher interest rate that expires after a certain period of time. Typically 6 months or so. Move your savings from one financial institution to another as soon as the ‘teaser’ expires and make use of the next one.
Compensation system for savings
Another piece of excellent news is that after the crisis of 2007 at Northern Rock a compensation system has been put in place in answer to the question of the safety of your savings. This system applies to financial institutions across the board. The scheme known as the Financial Services Compensation Scheme (FSCS) has been strengthened over a period of time and as of the 31 December 2010 gives savers a guarantee of compensation up to 85 000 pounds, should the bank, building society, credit union, or friendly society go bust before you manage to get your money out. This at least is one less worry as the sum is substantial and you won’t loose everything, unless of course you have twice as much sitting in the vault. It is quite a conundrum, and makes you wonder about that age old practice of mattress stuffing…