Savings

With bank and building society saving accounts offering their lowest rates in 20 years, it is easy to see why many people are looking for an alternative place for their your money.

A year ago you could earn 6% on a saver’s account, now it’s just over 3%.

A savings war is currently underway because saver’s cash is used to help fund loans and mortgages on the wholesale market. Yes that’s right, although you save your money, its not actually ‘in the bank’ as it’s being used to fund other peoples’ loans.

Some deals being offered include an introductory bonus such as Teachers Building Society who offer 3.0% with a 1.25% bonus until April 2010, but be prepared for further hassle of moving your money again as you could become stuck in a deal that will become uncompetitive, especially with interest rates due to start rising at some point.

On the High Street the next offer we could find is Manchester Building Society who offers 2.26% but here a restriction applies as you need to save a minimum of £1000. It is possible to earn an even higher rate if you have money you can afford to lock away for more than 5 years.

If your account does not have a fixed interest rate, the interest rate you are offered can diminish over time, thus lowering the investment return on your savings. Similarly, if you have a fixed interest rate and the basic interest rates rise, you could be earning less on your savings than if you had a variable interest rate. So what is the right choice?

An easy access account provides an alternative to a savings account, although this may be instantaneous, some providers restrict your savings as well as charging you for withdrawing your own money.

The increasing gap between interest rates and the base rate, makes it look like a tempting time to put some cash aside and invest rather than save, but choosing the right investment is important.

So instead of your money barely earning anything, it’s time to take action and make sure that you, not the bank or building society, benefits.