How to beat inflation?

Student_of_£

I'm currently a student with money in a 3.05% ISA, the deal ends in Aug and the last time I can put money in will be 5th April!
As 3.05 in currently above the rate of CPI I think (my maths is awful) my money is growing by 0.35% (3.05AER - CPI @ 2.7%)
As savings rates are plumetting I'll assume I take an M&S one year fixed ISA @ 2.35%. If inflation were to stay at 2.7% the spending power of my money would fall by 0.35% (2.35AER - 2.7% CPI) If inflation were to increase to 3% the value of my savings would fall by 0.65%.

How can I not only maintain the spending power of my savings but make my money grow? I don't feel the stock market is a good thing for me right now as the money in my ISA is being saved as an emergency fund and for the future!
Thanks

innovate

Google How to beat UK inflation for some thoughts

kidmugsy

Student_of_£ wrote: »

As savings rates are plumetting I'll assume I take an M&S one year fixed ISA @ 2.35%.

My own inclination would be to contribute to an instant access Cash ISA and fix only when rates increase again, as they will some day.

Or wait and see whether ns&i issue their ILSCs again.

bowlhead99

Student_of_£ wrote: »

How can I not only maintain the spending power of my savings but make my money grow? I don't feel the stock market is a good thing for me right now as the money in my ISA is being saved as an emergency fund and for the future!

Not having any cash above what you need as your emergency fund is a problem faced by loads of people.

The problem is that if you cannot afford to take any risk, nobody will really want to volunteer to take your money, do something with it to try to make a profit, and promise to give you back more in real terms than you had originally.

Remember that you are effectively asking the middleman to invest the cash and make enough of a return to cover their costs of operations, make a profit for their owner on top of that, and give you back more money than you started with, over and above the general level of inflation. He can't do this without taking risks of some sort.

In some years the interest rate for savers is higher than inflation depending on what they can do with it (their ability to lend it out without too much risk etc). Long term, not so much. At the moment all the big banks can get cheap money from the government (funding for lending scheme) so they have no real need to offer you guaranteed real profits to attract your deposit.

Sorry if this doesn't help you much. Better -not guaranteed- returns are potentially available (through stock market, buy a property, buy gold or certain commodities contracts etc etc) but none of them are suitable for someone who is just starting out and doesn't have anything available to risk over and above what they need to keep on hand for a rainy day.

cepheus

Do you have a lot in the ISA? Being a student you are unlikely to pay tax anyway, therefore you can consider a wider range of accounts than ISAs.

However, it can be useful to retain cash in the ISA for larger amounts, say 10k+ for when you start work and paying tax again.