A little confused - Interest Rate/Inflation Rate

DannyWhoWorks

Hey!

I have savings and I was reading Martins guide and something caught my eye which read it is important that your savings are not losing!

Of course, this caught my eye, it read the importance of making sure that that interest on the savings account is beating the current inflation rate.

It took a little time, but it looks like the inflation rate is 2%.
Now, looking on martins guide, there is only one savings account (which is in fact a current account!) which offers higher than this.

So does this mean every other savings account is losing money?

I know this can't quite be right so I have lost the track a little, maybe the inflation rate is not 2%? but if anyone can explain, that would be great!
Thank you!

Voyager2002

Yes, you are right. Most savings are gradually losing their value.

Glen_Clark

You can put your money into shares that pay, say 4% in dividends.
But that won't look so attractive if savings rates go back to 5%
And the price of your shares will fall as people try to sell them to go back into cash, so you won't get back as much as you put in.
Thats one of the extra risks you have to take, for a higher reward.

CLAPTON

DannyWhoWorks wrote: »

Hey!

I have savings and I was reading Martins guide and something caught my eye which read it is important that your savings are not losing!

Of course, this caught my eye, it read the importance of making sure that that interest on the savings account is beating the current inflation rate.

It took a little time, but it looks like the inflation rate is 2%.
Now, looking on martins guide, there is only one savings account (which is in fact a current account!) which offers higher than this.

So does this mean every other savings account is losing money?

I know this can't quite be right so I have lost the track a little, maybe the inflation rate is not 2%? but if anyone can explain, that would be great!
Thank you!

the lastest figures for the rate of inflation are 2.7% (CPI) and 3.3% (RPI)

Freecall

Also, remember that for ordinary non-tax protected accounts you have to pay tax as well.

So 20% of your 3% interest goes to HMRC leaving you with 2.4% in cash terms (or just 1.8% if you pay HR tax).

kidmugsy

Glen_Clark wrote: »

You can put your money into shares ...
Thats one of the extra risks you have to take, for a higher reward.

Not so much "for a higher reward" as "in hopes of a higher reward".