Finance News

Savers Can’t Beat Inflation with Current Bank Offerings

Whilst there is a lot of talk about debt as the financial crisis continues, there is very little attention paid to savings. One of the biggest reasons for the economic downturn in the first place was a lack of savings and too much debt, yet it seems those who did save and were not part of the problem are being punished for their actions.
In a bizarre reversal of the classic Aesop’s fable, the grass hopper was bailed out with public money and the ant, who kept back savings for a rainy day, found that they began diminishing in value as the cost of living outpaced the returns he was getting. Savers are finding that the nest egg they built up is not increasing as quickly as inflation, making their money literally worth less.
Of over 1,000 savings accounts currently on the market, only 227 offer basic rate tax payers a high enough rate of interest to beat inflation, according to the UK savings products monitor Moneyfacts. Of the ones that do keep you ahead of inflation, it’s not by much, and you’d have to have vast figures held at a bank in order to create a liveable income from your savings.
In addition to that, many of the higher rates are only paid if you lock your money up in the bank for years, meaning that for anybody looking to use their savings to create additional income, they won’t see the fruits of their labour until much further down the line. It also creates a problem with risk, as the current economic state of the world means you have no idea what will happen in the next six months, let alone farther than that.
Unfortunately, there does not seem to be much helpful advice for savers relying on money in the bank, it is simply a case of Aesop’s cautionary tales not being applicable to the modern age.