Published on: 21 Aug 2018
Saving can be difficult enough these days without the added pressure of rising inflation. It is unwelcome news for many and comes at a time when savings rates are already low, resulting in an increase to the price of living and making it harder for savers to put away those rainy day pennies or contribute to their mortgage and loan repayments.
How it may affect you
According to figures released from the Office for National Statistics (ONS), the Consumer Price Index (CPI) increased at an annual rate of 2.5% in July. This compares to a rate of 2.4%, which was recorded over the three previous months. The ONS’s alternative measure, the Consumer Price Inflation (CPIH), which includes housing costs, remained static at 2.3%.
Laura Suter, personal finance analyst at investment platform AJ Bell, said: “The high inflation figures continue to clobber savers who are in many cases losing money on their savings in real terms. No easy-access savings
accounts pay anywhere near as much as inflation and banks refuse to pass on all of the interest rate hike announced by the Bank of England earlier this month.”
A rise in fuel and transport prices is a clear example of how this change has affected the cost of everyday living.
What can you do?
You may want to consider switching the type of bank account
you have, or simply switch banks altogether.
Ms Suter adds: “Cash savers can find better deals by using high interest current accounts or regular savings accounts, although these often have caps on balances and require the transfer of direct debits. However, a few minutes spent shopping around for a better deal can stop savers’ money being eaten away by inflation.”
Where and how you invest can make all the difference to your long-term savings. Feeding a small amount each month into a stocks and shares ISA or a pension fund is a sensible way to build a healthy sum over the years, while also protecting your savings as you go.
The best deal for you
A number of current accounts offer inflation-beating interest rates; however, sometimes they come with various restrictions and demands.
Interest rates on savings accounts
are so low that more people are turning to their current accounts to grow their cash. Many other providers offer attractive bonuses to tempt you into switching.
Here are a few examples of high interest current accounts that might suit you.
5% interest on balances up to £2,500
The 5% interest rate is an introductory 12-month offer - when it ends the rate drops to just 1%. Agreed overdrafts are free for the first year but you’ll need to pay in at least £1,000 a month.
TSB Classic Plus
5% interest on balances up to £1,500
You’ll need to pay in at least £500 a month, register for internet banking, opt-in for online bank statements and paperless correspondence to get this headline rate.
Tesco Bank Current Account
3% interest on balances up to £3,000
The supermarket giant pays 3% interest on balances up to £3,000 and has guaranteed to maintain this rate until 1 April 2019. It also rewards debit card spending with club card points.
You earn one point for every £1 spent in Tesco, plus one point for every £8 spent elsewhere. For new customers this account also has a £750 minimum pay-in and requires you to set up three direct debits.
Bank of Scotland Vantage
1.5% interest on balances up to £5,000
You must pay £1,000 into the account each month, stay in credit and pay out at least two direct debits. To access this interest rate you must open a standard current account with the bank and request its Vantage add-on.
Lloyds Bank Club Lloyds
1.5% interest on balances up to £5,000
To earn this rate of interest you must pay £1,500 into the account every month and have two direct debits set up. Account holders can also get extra benefits such as six cinema tickets, an annual magazine subscription or annual Gourmet Society membership.
If you’re serious about saving and avoiding high interest rates you may want to consider switching. You can also look at some of the links below to get even more tips on keeping MoneyFit.
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