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Why #save? Buy cauliflowers instead

cauliflower 805414 640This is not a call to throw caution to the wind and raid your piggy banks to spend, spend, spend. Then again, it is tempting: because if you leave it in an account, you are losing money on your savings. The current inflation rate is 2.3% - the highest for more than three years. So if you hid £100 under the mattress a year ago then today its spending power is £97.70. And what’s more, inflation is forecast to be 3% by the end of the year. That’s bad enough when base rate is stuck at 0.25%.

Base rate is the rate of interest set by the Bank of England. Its use is for interbank lending – but it also affects how much your bank or building society will pay on your savings account. So at the moment, you’re earning diddly squat on your savings. I’m getting 0.8% on my Isa and can’t find the energy to move it elsewhere for a few measly quid a year extra interest. So it’s hardly surprising then that Britons aren’t saving: official figures out today say that we are spending less than at any time since records began sixty years ago. Why would they want to lose money?

Yet I wouldn’t feel happy if I didn’t have some cash squirreled away even if I know it doesn’t make economic sense. If I had debts, then I would use my savings to pay them off (unless there were penalties to do so). Jane would say that I should invest instead – and yes, that’s probably a good idea. But you can lose serious money (rather than just have inflation gnawing away at your savings) on funds and shares and I can’t really afford to gamble. My only hope, I suppose, is that the Bank of England will try to stem rising inflation by increasing base rate. However the Bank has said in the past that when interest rates start to rise, they will do so in an orderly fashion: so no seismic changes, then, for me or other savers.

One final thing on inflation: the official rate might be 2.3% but individual inflation rates can be vastly different. My council tax bill for 2017-18 is 6% up on the previous year: more than double the annual rate. On the other hand supermarkets have slashed the cost of cauliflowers compared with last year and they now cost less than £1 a head. It will be just about all we can afford to eat....

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Monday, 17 December 2018