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Savings Accounts – Are They Worth It?

It wasn’t like that in my day

It’s an often heard phrase usually uttered by a disgruntled and crumpled pensioner about some aspect of modern life. Well, thank goodness it’s not like it used to be as far as savings bank accounts are concerned. They used to be pointless; today they are a little different.

Inflation

Inflation is a funny old thing. We all know it affects our spending power, we all know that when fuel or the price of a pack of cigarettes or a pint of beer or a loaf of bread goes up that we have less in our pockets afterwards. But inflation also plays a very big part in the way we use bank accounts and the way we deal with debt.

Riot

Back in the 1970's inflation was running riot. Levels for some time were running at around 20% and even hit a massive high of 28%. In the eighties it reached 21% and in 1990 at the start of the recession hit 10%. These days it sits at 1.3%. The last time Britain has seen rates this low was in 1963.

High inflation is great for people with debts, because it makes the debt dwindle into insignificance after a short while. Annual wage awards roughly keep step with inflation so a debt simply disappears. For people trying to save, however, it renders the whole exercise rather pointless as the buying power of the money that has been put away simply dwindles just like the debt!

So in today’s low inflation culture, where are savings bank accounts? The answer is, they are providing good value for money. Many banks are able to offer interest rates more than double the rate of inflation.

At the top of the tree is the Alliance and Leicester who are currently offering a whopping 10% on their regular saver premium account. Most of the other High Street names are offering around the 4-5% mark.

Pros and cons

The thing to keep in mind if you are going to open a savings account is that although they do pay more interest than a current account you may be limited as to how many times you can make withdrawals and you may also have to give substantial notice of when you want to make that withdrawal.

Look for an account that will pay you the interest on a regular basis. A good savings account will often credit your account monthly; it’s not much use seeing interest credited to your account only annually.

Internet based bank accounts will usually offer higher interest rates on savings than High Street banks, so it’s worth looking around for the right account.

Your country expects…

The Government has expressed the opinion that we as a nation should be saving for our futures more than we do. There are those who are disciplined enough to put regular sums away each month, but most of the working population seems to have outgoings that equal (if not exceed) their income. Saving for them is not a matter of choice, it is a fanciful wish.

Putting that to one side, however, we could say that unless a person makes a commitment to save it will never happen. And the best way to make that commitment is to set up a direct debit from your current account to your savings account. That way every month you will get used to a sum leaving your account and after a while you might not even notice it. You will be surprised at how quickly your savings account looks healthy!

“Look After the Pennies…”

…and the pounds will look after themselves.” That’s what my old grandmother used to say. Wise words they may be; but then, things aren’t what they used to be, are they?

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Posted on: [ November 03, 2017 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon