• Holly Nardi

Did you know that you're losing money by holding your savings in cash?

Updated: Aug 22, 2020

WTF is this blog about!?

  • Due to inflation, the amount of cash you have now will be worth less in the future, so you should keep your savings in an account that helps your money grow.


Like I said before, interest rates are really f*!king low rn, which means if you've got cash sitting in a bank account or stashed under your mattress, you're actually losing money!

This is because, at the moment, the average interest rate on a current account is 0.01% (i.e. if you save £100, you'll earn 1p of interest in a year 🙄). Whilst inflation is around 1.5% (i.e. the £100 you have now will only be worth £98.5 in a years time). So effectively, by holding £100 in your bank account, you'll have lost £1.49 in a year.

How can I make my money grow?

The main way to make your money grow is by investing it (which I'm going to cover in my next blog, so stay tuned 👀). But you should only be investing your money if you can afford to lock it up for at least 5 years.

So what about the money I'm going to need in less than 5 years?

If you're going to need to access your cash within the next 5 years, you should be holding it in #securesavings (i.e. savings that aren't at risk of falling in value). These include Cash ISAs (ISAs are a tax-free way of saving and investing) and savings accounts - both of which should help you earn a higher interest rate than you do on your bank account.

When it comes to #securesavings, there are two main options:

1. Easy-access

This is where you should be keeping your emergency fund. Easy-access Cash ISAs and savings accounts allow you to withdraw your money whenever you want.

Personally, I used to hold my emergency fund in an easy-access Cash ISA with Coventry Building Society, which paid 1.5% interest (which was the best I could find at the time). But I received an email last week telling me that this rate was going to fall to 0.85% on 5 May, so I've now opened a savings account with Marcus (Goldman Sachs), which pays 1.2% interest (check out The Money Saving Expert for other options). All you eagle-eyed readers may have noticed that this is still lower than the current rate of inflation, but you can't get much better than this I'm afraid!

Note that unless you have a s*!t tonne of savings, you won't be missing out on any tax benefits by moving your money from a Cash ISA to a savings account because we're all given a 'personal savings allowance', which means we can earn up to £1,000 a year in interest (or £500 if you're a higher rate tax payer) before paying tax.

2. Fixed rate

These accounts typically offer higher interest rates but require you to lock your money away for a set period of time (usually between 1-5 years). The longer you lock your money away for, the higher the interest rate you earn. The issue with these accounts is that if you need to withdraw cash before the fixed term is up then you will pay a penalty (usually equal to the interest rate you've earn't) - so unless you're certain you won't need the money within the set time period, you should probably just put it in an easy access account.

Another alternative is a regular savings account. These offer relatively high interest rates but require you to save a set amount each month. And if you're saving for a house worth less than £450k, there's always Lifetime ISAs.

So what?

If you're currently holding your savings in a regular bank account, find out whether you can move it to a Cash ISA, savings account or Lifetime ISA, depending on what you plan on using that money for.

If you can afford to lock your money away for at least 5 years, stay tuned for my next blog!

If you want to find out more about ISAs, you can download A Millennial's Guide to ISAs for FREE by subscribing to my mailing list.

Now for the serious part: my blogs are for educational purposes only; they do not constitute financial advice. Please consult with an independent financial advisor for advice on your specific circumstances. 

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 This blog does not constitute financial advice. 

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