Is it a waste of time to open savings accounts?

EltonJohnFan

Hi all,

I'm posting for some advice because I am trying to save up enough money to be in a position where I have a bit of security behind me because I know what it's like to lose your job and have no money to fall back on, it happened to me just a few months ago. I currently have a Current Account with my bank and I just recently opened an ISA account too which I'm slowly filling up when I can. I'm not working at the moment which makes it difficult but I am sure I'll find a job again before too long. I'm not rich but I can save alright which is a handy skill to have I think. I'm still pretty young and that probably counts for something too in that whatever I do I'll have more time to build up my money.

Right now I also have an ordinary Saving Account which I hold with my bank and having just queried the rate of return I'm getting (which is a pathetic 0.10%) it's got me thinking about whether I'm being taking for a mug because I know my money is shrinking sitting in these accounts with inflation and all and If that wasn't bad enough I'm limited in what I can put in my ISA and my Current Account doesn't pay any interest whatsoever! What are my options? the bank suggested Bonds/Investments but my father told me that will only make them money and I'd definitely be wasting my time thinking about those. He mentioned that I should think about going into property... can you tell me more? would I be better off saving and then buying property to rent out for a monthly income?

opinions4u

EltonJohnFan wrote: »

Right now I also have an ordinary Saving Account which I hold with my bank and having just queried the rate of return I'm getting (which is a pathetic 0.10%) it's got me thinking about whether I'm being taking for a mug because I know my money is shrinking sitting in these accounts with inflation and all and If that wasn't bad enough I'm limited in what I can put in my ISA and my Current Account doesn't pay any interest whatsoever!

Ok, why rely on one bank?

You can get 2.8% on an easy access savings account at www.theaa.com/savings.

You can get between 2.5% and 3.0% on an easy access cash ISA. Choose from the list at www.moneyfacts.co.uk/savings.

If you can credit your bank account with £1,000 a month (or move the money around different accounts to achieve this) you can earn £60 a year after basic rate tax at www.halifax.co.uk.

What are my options? the bank suggested Bonds/Investments but my father told me that will only make them money

I'm sure the bank will look to lend your money on to somebody at a higher rate. But surely it's better to get some return than no return?

He mentioned that I should think about going into property... can you tell me more?

Yeah, there's those house things near us. A handful are for sale. You need lots of money to buy one, but the likelihood of any noticeable increase in value over the next few years in limited. If you put tenants in, you have to manage the tenancy and comply with a range of legislation to make sure you don't gas them to death. If they don't pay, or leave and you can't find a new tenant, you're income drops. If the area around the property you own begins to decline, so does your investment. It is a total "all eggs in one basket" scenario.

would I be better off saving and then buying property to rent out for a monthly income?

Possibly. But there are a multitude of risks involved that could leave you losing money rather than making it.

xrjtg

It's true that interest rates are currently lagging behind inflation, so that in some abstract sense money you save until next year will be worth "less" than it is now. However, this is a broad generalisation across the whole country, and what matters is the value of the money to you. For example, you say you want to achieve a degree of financial security, and for that reason you personally will be better off in a few years time if you save the money as you intend to rather than if you buy things now that you don't want or need.

You should also bear in mind that there are better rates than 0.1% available, and if you tell us how much you're looking to save that's something we can help you with.

Investments of any kind are unlikely to be what you want right now as they are not the place for money that you might want at any time or can't afford to lose. (Banks are not the place to take out investments either, but that's not relevant here.) Exactly the same holds for property.

Stick with savings for now, but not with your current bank.