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The record low savings rates of recent years have been a huge blow to savers, many of whom are missing out on opportunities to grow their pots or secure meaningful returns. As a result, many are looking to alternative methods of saving, with research from Wesleyan revealing that savers are becoming increasingly open to riskier options.
The figures reveal that savers are developing a far more robust risk appetite, with a growing number turning to riskier investments as they seek greater returns on their savings. Indeed, 22% of respondents are taking more risk with their savings than at this time last year, with 8% saying that they've significantly increased their risk appetite in that time.
Unsurprisingly, much of this shift was driven by low savings rates, with 21% of respondents who changed their appetite to risk saying it was because they wanted to seek better returns elsewhere. Even so, the most popular products still include savings accounts (38%) and ISAs (33%), while 22% now use current accounts for long-term savings, so it seems that security continues to reigns supreme. Indeed, 21% have taken a more cautious approach to their savings due to wider economic events, so it's clear that risk isn't for everyone.
"Low interest rates have increased consumer spending, but they have also led to people increasing their risk appetite as they seek higher returns on their savings," said Vicki Wentworth, chief customer and strategy officer at Wesleyan. "In some cases, higher risk investments can help savings pots grow, but what we're seeing now is savers taking more risk than they might normally be comfortable with."
For the vast majority of savers, security will be key, which is why cash savings accounts remain the most popular choice overall. There's been some improvement in rates recently, too, particularly in the fixed sector of the market, so now could be a good time to check out the best savings rates to see the kind of deals available.
But what if you're looking for better returns than can be achieved by saving in cash? You may well be one of the 21% who have adjusted their risk appetite in recent months, in which case you may be considering options such as stocks & shares ISAs.
These can be ideal for those who want the tax-efficiency of an ISA wrapper with the growth potential of the stock market, but you'll need to make sure that you really are comfortable with the extra risk involved with this form of investing. Find out more about stocks & shares ISAs to see if you're willing to take that risk.
Even if you take the plunge – which should only ever be considered after seeking professional financial advice – you will still need to strike the right balance between risk and security. In other words, don't put all your eggs in one basket. While things like stocks & shares ISAs offer the potential for better returns, there's still the chance you could lose money, so it's often wise to split your savings between a variety of pots (such as a cash savings account and a high interest current account, as well as a stocks & shares ISA) to get the perfect mix of security and growth potential.
The decision that you make with your long-term savings, particularly if you're thinking of investing in the stock market, could impact your finances for years to come, so it's essential you choose wisely. This is why professional advice should always be sought, and remember that if you're not comfortable with risk, traditional savings accounts can still provide a great home for your money. Check out the best savings rates here.
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