Is the value of your money wasting away?

Recent YOUGOV findings show that nearly a third of people aged 18-65 are unaware how to improve the value of their savings or even to keep up with inflation. 

IF YOU WANT THE VALUE OF YOUR SAVINGS TO GROW.

Here are the factors you will need to consider:

THE PRESSURE OF INFLATION

Rising commodity prices, such as food and oil translate into steeper costs for consumers.

Stronger economic growth also causes inflation to rise; which in turn leads to companies raising their prices as the demand for goods and services increases.

BE CONSUMER SAVVY

Rising inflation is constantly eroding the purchasing power of your savings and many people do not know how to avoid it; this has led to a lack of consumer awareness how best to approach the issue.

SHORT TERM v LONG TERM SAVINGS

Many people think that Cash ISAs will help maintain the spending power of their savings. However, with cash ISA rates at only 2% annual interest, this is less than the current rate of inflation at 3.1%, as shown in the chart below.

UK INFLATION RATE

Clearly, on this basis, one should only use cash ISAs for short-term savings of 1-2 years.

With the rise in the tax free ISA allowance of £20,000 introduced in April this year the concern is that people will leave their long-term savings in cash ISA where it will be eaten away by inflation.

Saving for the longer term such as retirement, paying for school fees or repaying a mortgage, one should take advantage of saving or investing in an Investment (Stocks and Shares) ISA. Although the return on an Investment ISA is not guaranteed, with professional research and guidance an attractive return can be obtained over the longer term, typically 3-5 years.

A broad based mixed investment ISA has achieved a historical average annual performance of 6.3% per annum over the last 5 years.

Investing in an Investment ISA clearly outperforms inflation and provides a good return on long-term investments.

IN SUMMARY

• With inflation now at 3.1% and cash ISAs only giving 2% per annum cash ISAs are not giving a good return on your money.
• For long-term savings and investments cash ISAs should be transferred to Investment ISAs.

If you would like independent advice regarding savings and investments please contact us on our Freefone number 0800 193 1066 or click on the Investment enquiry button. 

NB: The value of your investments can go down as well as up, so you could get back less than you invested.