With the Bank of England keeping interest rates at 0.25 percent, the interest offered on cash savings cannot compete with the rising state of inflation meaning the value of one’s cash will eventually go down. Savers are urged to consider better options for their money that can potentially see returns that match that of inflation.
“Cash therefore still looks like an uncomfortable place to be for the foreseeable. It’s still the only option for short term savings that might be needed at the drop of the hat, but as a longer term store of value, the return of inflation has left cash looking even more woeful.
“Savers should aim to have three to six months’ worth of expenses set aside in cash for an emergency, but should consider investing anything above that which they are willing to leave untouched for five to ten years or more.
“Investing any cash gradually will help to level out entry points into the market, and make for a smoother journey.”
With investing capital is at risk so Britons should seek help if they do not know what they are doing.
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Andrey Dobrynin, InvestEngine Co-Founder and Managing Director offered some advice for those who may want to start investing in 2022.
He said: “Just as investment products have a ‘capital is at risk’ warning, cash products need to have one too.
“With interest rates through the floor and inflation rates rising, banks providing current accounts or cash ISAs need to be providing more information to consumers on the impacts this could have on the real value of their money shrinking – especially if they are locked in for the long-term.
“Everyone’s needs are different but financial transparency and choice is key for helping people meet their goals.”
Martin Lawrence, director of investments at Wesleyan Group, said: “Keeping cash in savings accounts during a period of rising inflation and low interest rates, such as we have now, means your money is in effect losing value.
“If you can lock your money away for a minimum of five years, then it’s worth thinking about investing in stocks or investment funds, which give savers a fighting chance of beating inflation.
“For those who want to invest in stock markets but don’t have the expertise, investing in a ‘multi-asset’ fund could be a good starting point.
“A Wesleyan with Profits ISA, for example, enables people to invest in our With Profits Fund rather than having to invest in individual companies or assets, and the financial returns are also ‘smoothed’ to reduce the impact of any market volatility on your money.
“A fund is managed by a dedicated, professional Fund Manager whose job is to achieve the strongest possible financial returns for all its investors.
“Importantly, for anyone investing in a fund via an ISA, there’s no requirement to pay capital gains tax or income tax on your investment returns.”
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