Welcome to this week's Finance Fridays. Last week we were looking at borrowing options now interest rates have dropped. This week it is the turn of savings. I had an email last week telling me that some of my savings accounts will be having a cut in interest rates. This is to be expected but with some savings rates dropping to 0.01% what are the options now for savers?
Long term savings accounts – If you don't need the option of instant access to your money have a look at fixed rate bonds or accounts which require a notice period in order to withdraw your money. Do be aware that if you do need to withdraw your money early there is usually a penalty in the form of loss of interest.
Stocks and shares – After the EU Referendum vote the stock markets took a severe hit but they have recovered now. You may not feel comfortable about investing in individual shares so look at easy to invest in products such as a Stocks and Shares ISA. Do be aware that the value of your savings in such accounts may go up or down.
Swap current accounts – Most free, basic bank current accounts stopped paying interest years ago. However a number of banks have started to offer current accounts with interest or cashback deals. You usually have to pay a monthly fee or meet certain conditions such as paying in a minimum amount of money each month but it could be worth your while. Some also pay out a sweetener when you swap.
Peer-to-Peer – Also known as P2P this type of savings scheme has grown in popularity in recent years due to the returns that can be generated. Instead of saving with a bank or building society you hand it over to a P2P company who then lend the money out to companies and individuals. The P2P will charge a fee for this but in return you could get a very good interest rate depending on how much money you wish to invest and for how long. The risk with this type of saving is if the P2P is unable to fulfill its obligations to its investors as they are not covered by the Financial Services Compensation Scheme (FSCS)
Whatever you decide don't keep large sums of money in your house. It's safer to have it earning no interest in a bank or building society rather than under your mattress.
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