Savings pots earning less than 3.25% interest are losing their value
The rate of inflation is currently 2.6% and a savings rate lower than that will mean the pot of money will be losing its buying power over time, according to financial planning website, Moneyvista.
Savers need to have all (non ISA) savings in accounts which are earning a minimum of 3.25% interest, in order to just cancel out the eroding effects of inflation.
Teresa Fritz, consumer finance expert at MoneyVista said, “The rate of inflation has a direct impact on your savings, as it controls the buying power of your money.
“If the rate of inflation is higher than the rate you are receiving on your savings, your savings are actually losing their value.”
Moneyvista says that despite the touch economic climate, there are still some savings accounts which can help boost your savings pot.
Some rates are higher than inflation even after tax.
Savers prepared to tie down their money for a longer period stand to gain the best rates.
Fritz advised: “Banks and building societies entice you in with seductive headline rates.
“But these often include bonuses which fall away after a few months, leaving you earning a pitiful rate of interest on your savings which is often below inflation.
“Unfortunately this means it’s not just enough to shop around for a best rate account when you open a savings account.
!You have to keep track of the rate you’re getting and be ready to switch if you want to make sure your savings aren’t eaten away by inflation.”
Moneyvista advises savers to shop around for the best interest rates and to look around for best buys.