This is not good news for savers. A toxic combination of low interest rates and high inflation means their money isn’t just not earning much, it’s actually devaluing over time.
Inflation has been above the Bank of England’s target rate for 13 consecutive months, while base rate has been at its historic low of zero point five percent for almost two years.
And with the average savings account paying just 0.19%, some savers have clearly given up on chasing better rates.
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In fact, if you’d had £10 grand held in a savings account paying that paltry average rate over last year, you’d have actually lost £331 through inflation. That’s an unbelievable waste.
You might struggle to make real returns on your savings because of inflation and taxation. But you can fight back by protecting your money in a tax-free ISA or locking your cash away in a fixed rate bond that pays a higher rate.
But you still need to be ready to move your cash to a better deal as soon as the rate falls.
There could be some relief on the horizon for the country’s savers. The January inflation figures are likely to be equally shocking as they will include the VAT price hikes.
High inflation puts tremendous pressure on the Bank of England to raise the base rate. While that’s bad news for borrowers, savers will certainly pop a few corks if their returns start edging back up.
What’s really worrying is that one in four people polled by moneysupermarket.com have said that they cannot afford to save this year, because of the high cost of living.
It makes sense to keep some ready cash for a rainy day fund, so consider putting some money aside into an easy access savings account.
If you have no savings at all, a regular saver is a good way of building up a pot, and you can put aside as little as £25 a month.
Whether you’re a saver or in debt, single or have a family, you can fight back against inflation. Use discount vouchers and shop around to make sure you’re getting the best deal, whether it’s on your energy bills, your groceries or even a meal out.
moneysupermarket.com analysis shows you can save more than £3,600 this year by comparing the best deals and cutting your bills. You can’t control inflation but you can find the best prices going and protect your household.