Losing Money Saving?

smokeybarr

I've just read the bit on savings stating if my interest rate is lower than that of inflation, my savings are losing me money.

So what should I do?

Take my money out of my savings account and stick it under the mattress? Surely then I'll be even worse off as I'm not receiving any interest at all!!

Decrease inflation? Errr.....

Find a savings account that pays higher than inflation? Hmm, good luck!

It's a bit frustrating that this site is telling me I'm losing money by saving, but not really suggesting an alternative.

browneyedbazzi

You're not technically losing money - you're losing spending power.

That being said, it depends on what you plan to spend your savings on. While some things are increasing in price due to inflation, other consumer goods are coming down in price (ie buying a computer 5 years ago might have cost you £1000 and today you can buy one for £300).

So if you're saving to pay for bread - which keeps going up in price - your spending power is reducing. If you're saving for things like consumer electronics/techy things -which tend to come down in price over time - your spending power is increasing

mtggirl

Hi,
The fact is that rates for savers are really low at the moment. It makes me laugh when they tell you to put your money in an isa because its tax-free. The interest rate on them is negligeable anyway so who cares if they take 30p tax off you at the end?
I have £300 pm going into my banks regular savings account at about 8% interest. This is the maximum you can save, so I have money going into other accounts too, and the rate is only available for 1 year, but every little helps. I will get £120 net interest at the end of the year, then I'll have to start looking around again. It is a shame though that we have to keep putting so much effort into looking around all the time. I had a dabble with ISA's - one year of good rates from my own bank, then had to move to a different bank, grrr

wanchai_2

browneyedbazzi wrote: »

You're not technically losing money - you're losing spending power.

That being said, it depends on what you plan to spend your savings on. While some things are increasing in price due to inflation, other consumer goods are coming down in price (ie buying a computer 5 years ago might have cost you £1000 and today you can buy one for £300).

So if you're saving to pay for bread - which keeps going up in price - your spending power is reducing. If you're saving for things like consumer electronics/techy things -which tend to come down in price over time - your spending power is increasing

Or houses!!! :T:T:T:T

Queen_Latifah

wanchai wrote: »

Or houses!!! :T:T:T:T

Don't get too excited as house prices will be going up from end of 2011 on and substantially over the next two decades. The demand is still bigger than the offer and rents are continuing to go up. The real bargain would be to pay for the house cash as you will be then saving a lot of money (you will end up paying three times the purchase cost of the house- in interest- over the life of a typical mortgage). If house prices were tumbling down, houses would be free by now...If they got as cheap as chips, there are people with plenty more of money than you to snap them up.

ellieellieellie

With savings and investments, I'm afraid the ones that might make you a little more money are the ones that also carry a much bigger risk.

Pay off any and all debts, credit cards, overdrafts, loans, maybe extra payments on your mortgage if you've got one.

If you're saving for something specific, it may not be worth worrying too much about - you're making an investment - but try to reach your target as quickly as possible to minimise the damage.

If you've got no debts (lucky you!), and aren't saving for something in particular, I'm afraid I don't know what to suggest! Maybe you could think about spending some of it? Not on something frivolous, but on something that's likely to last you a long time, like improvements to your home or garden, or upgrading your car.

It all really depends on your personal circumstances, but whatever you do, don't waste it.

ceridwen

The problem with just spending it is if one has already been spending it on things one requires/wants and there's nothing left one can buy (without moving to a better house that is.....).

So - I'm one of the ones only too aware of the deficiencies of the NHS - hence wanting savings to one side just in case....

...and....I want to save spare money because I still hope, at some point, to move on to my Forever Home (so am stuck with not being able to spend further money my current house could do with on maintenance work - in case I manage to move and would have thrown that money away) and the wanting to put spare money to one side in case I DO have a chance ever of moving (thus that "spare" would go towards the costs of "moving over").

If I was in my Forever Home (and had done all the work that needed doing on it to get it the way I want) AND if the NHS "came good" and became fully "fit for purpose" to meet our health needs - then I wouldnt be bothered about having much in the way of savings. Because neither of those things is the case - then its a matter of necessity to save if I can.

Ches

We are, hopefully, in our forever home and it and the garden are exactly how we want them to be. Small and easily maintained. Because of our ages we don't need anymore things ie, clothes/shoes/furniture/linen etc except for any replacements as they become worn. We both have enough savings each to meet any emergencies not covered by insurance and to cover any funeral costs so the family won't be burdened. The house is willed to the children as their inheritance. So what do we do with the spare money? well we save it for holidays. At the moment there are good deals out there and we are taking advantage of the recession. When the country is earning again the cost of holidays will rise and then we probably won't be able to afford to go anywhere. Chances are by then we will be too old to bother anyway. Its taken us till this time in our lives to realise that travel is enjoyable as family/house always came first. Now the money is for us to enjoy so who cares what the interest rates are like we are spending.