“It’s just so obvious at the moment that interest rates are low and lots of people are sort of talking about struggling with savings,” the financial expert and chartered account told Express.co.uk. Mrs Mummypenny, who shares her insight on her website and her Instagram, decided to experiment with her own money.
“I thought I’m going to actually experiment with this myself, with £1000 pounds in four different places and see actually how it grows over time.”
There is a caveat to the findings, Lynn said. Investments and pensions will go up and down in value and your own returns may vary.
“I wanted to see over time based on real numbers, only my real numbers, you can’t just assume that it’d be the same for you but are they going to go up or down,” Lynn, who runs Mrs MummyPenny Talks podcast, said.
She warned that given current interest rates, cash savings could be losing value each year.
She said: “You’ve got inflationary powers are working against you. Your pound today is not worth a pound in a year’s time.
“So, in effect, you are losing money at the moment with cash because interest rates are so low, lower than inflation. In effect, you are losing money over time.”
The most important thing to note when you begin to save is to, initially clear all debts. Then save your emergency fund, between three and six months savings. The rest you may save however you choose. Where did Lynn find the best returns?
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Fixed-term savings account
Lynn chose Zopa Bank for her fixed-term savings.
“They had just launched a new product in July last year,” Lynn explained, “so they were offering a top interest rate.
“I got a return of 1.3 percent on that one made £13.38 Again, not going to set the world on fire.”
The financial expert said: “It’s a better return but the thing is your money is locked away.”
If you are putting away money in a fixed-term savings account it is important to note you will not have access to the money till the end of that term.
Lynn went on: “I can’t touch the money till July 2022 and I’m only actually going to end up with it with a return of £27.”
Private pension
Lynn uses PensionBee, for which she is an ambassador, to consolidate and invest her pension. She put £1000 in a tracker fund in July last year. She then moved the money across when PensionBee launched a fossil fuel-free fund.
Explaining the decision she said: “I make so many day-to-day decisions about that. I have a hybrid car, I recycle, I tried to buy plastic-free, I eat more vegan food, and I was really frustrated that I couldn’t do anything with my pension.
“It’s the most powerful decision we can make as individuals, putting money into fossil fuel-free, so it was a big environmental decision.”
However, it paid for Lynn who made an amazing return.
She said: “Moving over to the fossil fuel-free and investing for a year, the £1000 pounds has gone up by 231 pounds. A return of 23 percent is just incredible.”
So, Lynn saw the best return on her pension. However, there is a big caveat when it comes to putting money in your pension to save it.
“I can’t access that till I’m 57,” Lynn explained. “That means the money’s locked up for 13 years. It’s a very long-term decision so you have to be sure that when you put money in that you definitely, definitely can afford it.”
So, does this mean the bulk of your savings should go into your pension?
Lynn says: “Saving into your pension is a low-risk option so long as you don’t need the money soon.
“You can lose money on that because, again, like with stocks, your money is being invested. But, the money is in there for such a long time.
“It’s a very long-term thing so the risks are mitigated the longer you leave the money in there.”
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