I was in the building society the other day, paying in a tiny amount of money in a futile attempt to replace some of the £1,800 I withdrew to pay for the new boiler. Next to me were a couple, probably in their sixties or seventies. They were signing up their savings into a three year fixed rate bond at 1.75%.
I’ve no idea how much money they had (I was earwigging, yes, but sadly could not hear mention of the amount they were moving) but I did resist the temptation to ask them why they were fixing their money in at a rate below inflation? Currently inflation is at 2.4%. So at 1.75% they are losing money. And if base rate does move in the next three years, they could be stuck into an uncompetitive rate.
But then I thought about it and realised that they were probably being sensible. After all, 1.75% is, I’m sure, a whole lot more than they are getting on a variable rate. It’s certainly more than I’m getting on my variable rate savings account. And at least the couple were doing something with their savings. Apparently half of us haven’t switched savings or a cash Isa in the past five years and 40% have never switched, says Hargreaves Lansdown.
I’ll plead guilty to the first – although I do check regularly to make sure it’s still a reasonable, if not the actual best, deal on the market. But never switching? Is it because people think it’s difficult to move savings? I can see it’s a bit of a pain to dig out all the necessary ID stuff and fill in forms online or in a branch. And frankly I wouldn’t bother to chase top rates all the time: too much work for too little return. But I wouldn’t leave my money festering in an account paying 0.15% - which is what HSBC pays on its Flexible Saver account. And there are plenty of other poor-paying accounts (take a look at the other high street banks for examples).
And it’s easy enough to find a good savings deal these days. You could use comparison site Moneysupermarket*, which does the hard work for you. Or you could check out tables on Moneyfacts or www.thisismoney.co.uk. However, don’t over-save. Leaving money even in the best savings accounts isn’t going to make you much these days. If you’re willing to risk your cash, then as long as you have six months’ income sitting in a savings account then you should think about investing. Have a look at our guides to investing here –and have a look at what investment firms are offering too such as Fidelity*