With the 2.7% increase in inflation from November it is becoming more and more difficult to decide where to keep our money. With the minimal choices of saving and investment, it seems that the most obvious options for students would be the banks, secure and without the risks of investing. But is saving as safe as it seems?
With interest rates edging closer to record lows, we’re paying a high price for trying to secure our finances. In association with Liontrust, Yougov points out the problem with saving: ‘when tax and particularly inflation are taken into account, it is quite challenging for savers to generate a ‘’real’’ return on their hard earned cash’. So with the little interest doing little to fill our pockets, investment is becoming more and more popular. 10% of the polls of the Institute of Financial Planning are now considering diverting to the stock market for the better return. The obvious downfall is the high risks that come with equity investment. With a much greater uncertainty in terms of long term returns, it is no wonder why students are as risk averse as they are, with 71% of people aged 18-24 stating that they were very unlikely to consider investment.
John Ions, Chief Executive of Liontrust, says: ‘It is worrying that despite low interest rates from banks and building societies so many people are unlikely to invest in stock markets in the next year’. It seems that savings are still prevailing as the best option…but by how far do the banks win the race? It appears to be a close finish with the average cash ISA paying a dissatisfactory rate of 1.9%. So if you want to stick to saving and not explore other options…at least explore other banks! It’s vital that if you are going to keep it in the bank…simply keep it in the best one for you!
If interest rates are next to nothing, why not purchase premium bonds? However, much like saving and investing it has its pros and cons. Despite having no scheduled interest, bonds allow you to enter your assigned numbers in a monthly draw to win cash. Pitfall: every £1 bond delivers the not so promising odds of 24,000 to 1! But with prizes from £25 to £1,000,000 you can get more 0’s on the end of that cheque the more bonds you buy! Unfortunately bonds deliver no interest whatsoever but with low rates right now, perhaps spreading your money across banks and bonds could be an option!
In terms of what the best option is for your money? Sadly there is no perfect answer. The reality is that if you’re willing to take the risk, investment can potentially bring with it bigger returns than the banks. But, understandably, with students already tightening belts for beer no one wants to put their money on the line. Savings and bonds will either bring a guaranteed return (guaranteed to be miserably tiny!), or one ranging between anything from 0 to 1,000,000! One thing students are advised to do is to simply browse for the best opportunity! Whether you’re ready to jump into equity investment or simply want to find the safest place to save make sure you get sound financial advice. Whether it’s the websites or the banks on campus, research is what can secure your decision on securing your finances!