MSE News: Should you fix your savings at rock-bottom rates?

Austin_Allegro

VT82 wrote: »

But back on topic, savers are really wanting to have their cake and eat it.

In Islamic finance, it is against the 'rules' to just be given interest. In their equivalent of savings, both sides have to take some risk if they expect to get a return.

In stocks and shares investments, you can get a decent return over the long term by taking a bit of risk. And it's better for the economy than savings as it can be used to benefit all kinds of businesses, not just to allow house purchases.

To expect to be able to give your money to a bank, have them look after it for you, give you means of accessing it, taking the risk of lending it in big lump sums for the long term but giving you access to it, in whatever amounts you want, in the short term, have your savings 100% insured (up to £85k), and STILL demand returns that beat inflation? That's kinda ludicrous when you think about it.

Ludicrous or not, it was normal until relatively recently, when the government and banks decided they would rather bail out people who had borrowed too much money instead of give a reasonable return to people who prudently saved. I think this is what annoys savers more than anything - the sense that they are being robbed to bail out the profligate.

I know it isn't as simple as this - and that there is something in the argument that if the banks and govt supported savers over debtors, the entire economy would collapse and thus everyone would be worse off - but it still riles me.

Anyway, there's very little we can do. A coordinated attempt to run on the banks would result in a government imposed indefinite bank holiday - your cash would simply be locked up and not given back to you. The only way round pitiful savings rates is to invest in something other than bank accounts.

jimjames

Austin_Allegro wrote: »

Anyway, there's very little we can do. The only way round pitiful savings rates is to invest in something other than bank accounts.

And maybe that isn't such a bad thing, making people think about their future and that saving in cash isn't always the best option long term as the hidden risk is that their money loses value over time. The risk in other investments is easier to see when the stock market drops for example and visible/perceptible risk is generally much easier to handle.

In the same way the perception of risk following 9/11 resulted in large numbers of people in the USA not flying as they judged it too risky so switched to driving instead. As a result the road fatalities spiked. You judge risk in your own car and think you are safer than flying when the reverse is probably true.

To quote "Gigerenzer ascribed the extra deaths to people's poor understanding of danger. "People jump from the frying pan into the fire," he said."

richardlionheart

richardlionheart wrote: »

yes under the mattress at least it will be there in the spring

ViolaLass wrote: »

As will the money in the bank - guaranteed if it's under £85k.

Sorry , was meant as Humour , if i had added ( unless its a memory foam mattress ) oh well

pqrdef

VT82 wrote: »

To expect to be able to give your money to a bank, have them look after it for you, give you means of accessing it, taking the risk of lending it in big lump sums for the long term but giving you access to it, in whatever amounts you want, in the short term, have your savings 100% insured (up to £85k), and STILL demand returns that beat inflation? That's kinda ludicrous when you think about it.

Not if borrowers pay rates that reflect risk, illiquidity, inflation and costs.

There's always a spread between lending rates and saving rates, and all these factors are taken care of by the spread. After factoring that out, the level of the market is still determined by supply and demand.

But at present we've got way too little demand, and we've got idiots in charge who think the answer is to have way way too much supply.

Of course they're more interested in manipulating statistics than actually fixing the economy. In fact they've forgotten what the difference is.

brizey47

Santander 123 account does cost £2 a month to run and the 3% is only up to the first 20,000. The banks need our money to function this current crisis was'nt caused by savers it was caused by irresponsible borrowing encouraged by irresponsible bankers. If you wanted a loan the minimum rate you'll pay is around 6%, credit cards are way above that. It's time to put more pressure on our politicians, write to your MP and ask what they are going to do for the savers who are keeping this country afloat, and if there's an election in your area and a candidate comes calling ask the same.

Noble_Savage

brizey47 wrote: »

write to your MP and ask what they are going to do for the savers who are keeping this country afloat

I've heard this mentioned before and I'm genuinely interested in this point. In what way is money held as cash savings in a bank, helping to keep the country afloat?

It's money that isn't being used for consumption, and it's not being used to provide capital for business. So it could be argued that money in a savings account does very little to boost the economy of a country.

Clearly you have very good reasons why you have cash savings. It's money you've put by to fund future purchases, perhaps, or to provide for unforeseen expenses. Both of which are valid reasons, but I'm not sure it can be said that it's an activity that is keeping the country afloat.

As I said, I'm not trying to argue, just interested in why it is you (and others) feel this way.