With inflation stuck at 8.7 percent in May, this is certainly true. Even FirstSave’s 6.15 percent rate is well below that.
Easy access savings accounts are even further behind, with Shawbrook Bank’s best buy deal paying 4.35 percent.
Gillespie says if returns on cash are not matching inflation, your money is losing its spending power in real terms.
Equities, by comparison, have historically managed to beat inflation, provided you hold them for the longer term.
Over rolling 15-year periods, the benchmark US Dow Jones index has returned 143.2 percent on average, easily beating inflation at 101.26 percent.
Stock markets may not losing out inflation today, but that should soon change as consumer prices peak and investor confidence recovers, Gillespie added.
Obviously, as an investment adviser, Gillespie wants us to buy shares rather than put money in the bank.
Yet she’s right. History shows that shares deliver superior performance to cash over the longer run, albeit with great volatility along the way.
It’s still the best home for long-term retirement savings.
Yet today, cash offers much tougher competition, and that has to be a good thing.
The stock market has to work much harder to prove its worth, and so do investment managers.
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