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How can my cash beat inflation?

How can my cash beat inflation?

Category: Savings

Updated: 18/05/2017
First Published: 18/05/2017

Thanks to inflation rising to 2.7% and savings rates languishing among record lows, it's become harder than ever to secure a decent return on your hard-earned cash. Indeed, our data shows that absolutely no traditional cash savings account on the market even comes close to beating inflation, so how can you ensure your money really is working hard? We've got a few ideas.

High interest current accounts

High interest current accounts could be the perfect home for your money, particularly if you're willing to indulge in a bit of active management. They pay far higher rates of interest than savings accounts, but often only up to a certain balance, typically around the £2,000-3,000 mark. This means that if you've got a bigger savings pot you may need to split it between a few accounts (and transfer money between those accounts to meet minimum deposit requirements), but it can be done.

TSB's account could be a viable option. It pays in-credit interest of 3% on balances up to £1,500, as well as £5 cashback each month if you keep two direct debit mandates, and another £5 for making 20 debit card payments in any given month. You just have to make a monthly deposit of at least £500 and sign up for online banking and paperless statements.

Nationwide's FlexDirect account offers yet more potential, with an interest rate of 5% on balances up to £2,500, together with cashback deals at selected retailers and a host of additional incentives, provided you pay in at least £1,000 each month. Take a look at the high interest Best Buys to see the other options available – if you're organised and can meet the requirements of each account, there's nothing to stop you from opening several to maximise your interest-earning potential.

Regular savings accounts

What about regular savings accounts? They tend to come with a whole host of restrictions, but they could be ideal for those who want to save little and often, particularly as some of the rates on offer are higher than can be achieved with other savings deals.

For example, Saffron Building Society has a 12-month regular savings bond that pays an inflation-beating fixed rate of 3.50%, provided you are (or become) a member of the mutual. It allows you to save a minimum of £10 a month up to a maximum of £200, which could amount to a tidy sum by the end of the one-year term.

Then there's Kent Reliance's one-year deal that pays a variable rate of 3.00%, again beating inflation. You can save between £25 and £500 a month, but you'll need to make sure you never miss a monthly payment (if you do, the account will revert to an easy access version paying a far lower rate) and you'll also need to be near a Kent Reliance branch, as this deal is entirely branch-based.

Investment ISAs

Ok, so you may not be investing in cash, but this option is well worth considering if you've got a savings pot you don't mind squirrelling away for a while. After all, over the last year the average stocks & shares ISA has returned growth of a whopping 16.5%, while the typical cash ISA return has been just 0.97%. This means that, if you had a £10,000 investment, you'd now have £1,553 more if you saved it in a stocks & shares ISA rather than a cash ISA, so doesn't it make sense to consider it?

There are already concerns that too many are saving in cash, and with inflation rising and interest rates still low, now could be a good time to consider the alternatives, provided you're comfortable with the extra risk. Find out more about stocks & shares ISAs by reading our guide, and see if you can make your money work harder.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

 
 
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