I knew I was right. Last month I shelled out more than £50 for a pair of kid’s shoes: far more than in previous years. Now it’s official: shoe prices are spiralling out of control. Inflation has gone up from 2.6% to 2.9% - the highest rate for more than five years. And this was down to the rising cost of oil – but also higher shoe prices which are up more than 5% on a year. Actually, all the things I pay out for seem have gone up a lot – including coffee (5.1%). The BBC says air fares, second hand cars and toys have fallen in price – I’ve not bought any of those lately so I guess my personal inflation rate is far higher than the 2.9% rate.
Inflation is really having an effect on my day to day living. I’ve got savings currently earning about 0.75%. Because that rate is so much below inflation I am effectively losing 2.15% a year on them. And it’s not as if I could do much better if I swapped to another account. Finance firm Hargreaves Lansdown says that not a single savings account – even those with fixed rates or cash Isas – beats inflation. It says the top widely available savings accounts pay 1.25% and you can get a percentage point more than that if you fix the rate: hardly worth the hassle of moving my money, really.
There are alternatives to saving – investing in funds, putting money in peer-to-peer lending, using current accounts which pay good rates or regular savings. However, none is a perfect substitute for the nest egg sitting in a savings account. If I had any debts then I’d use the savings to pay those off, but I don’t so I’m stuck. One alternative is Premium Bonds. The chance of winning a prize isn’t great and the likelihood of getting a £1 million jackpot about as likely as my fitting into a size ten at any point in the future. But there’s always a small chance (of winning Premiums Bonds, not the dress size reduction). And unlike the lottery, your stake is always safe and you can get your money back whenever you need it. Worth a punt maybe?
See our guide to savings here