Savers overestimate the interest they’re making
Many savers mistakenly assume they are getting several times more interest on their money than they’re actually accruing.
A poll asked people where they held their easy access savings and how much they thought they were receiving in interest.
The biggest gap was at Barclays, with savers believing they were earning 0.4% interest. But in reality, it pays just 0.01%.
NatWest savers thought, on average, that they were earning 0.8% on their easy access cash, but were in fact making just 0.1%. For one in five NatWest savers, they mistakenly believed they were making over 2% on their cash.
The table below reveals the results of the survey where 2,000 people were polled by Opinium for Hargreaves Lansdown in April 2022:
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “High street banks are spectacularly disappointing life partners. If you give them your unwavering loyalty for decades, you might assume they’re giving something meaningful back in return. But in fact, when it comes to our savings, they have very little to offer.
“It’s an expensive mistake to make, especially at the moment while inflation is running rampant. We can’t afford for our money to be languishing in savings accounts paying a small fraction of a percent. It means we all need to revisit our savings and find out just how much we’re making on our money. And if we’re with a high street bank paying a miserable rate, we need to switch.”
Coles said that the kinds of rates people are expecting to earn on easy access aren’t “unreasonable”.
“Right now, it’s possible to earn 1.56% from Virgin (if you’re prepared to open a current account), or 1.33% from Yorkshire Building Society, with no strings attached. It’s just that the high street giants aren’t delivering, so if you want these kinds of rates, you really do need to move to a smaller or newer alternative,” she said.
She added that once people have an emergency savings safety net of three to six months’ worth of expenses in an easy access account, the rest of the savings can work harder.
“If you’re prepared to tie your money up for a fixed period, you could make an even better return, because right now you can make as much as 2.4% over a year or 2.8% over two years.
“If you’re hanging on with your high street bank in the hope that they’ll eventually be persuaded to do the decent thing and raise rates, then you could be in for a long wait. But you don’t need to be saddled with a disappointing savings partner for life. There are plenty of far more attractive options out there, with much more to offer if you’re prepared to check out the alternatives.”
Related: See YourMoney.com’s How to earn 5% interest without tying up your money for years and The savings accounts paying the most interest which is updated monthly.