Money is now, more than ever, a cause for concern for many. With the effect of COVID-19 having an impact on a record-breaking number of individuals, millions are feeling the effects of a reduced income.
This raises the question, what is the best thing to do with your money, and are your savings secure and in the best yielding account? With stories of people clearing their accounts and holding cash, some clarity is clearly needed surrounding this question.
Where to keep your money?
When it comes to security, you should keep your money in the bank. Things are certainly safer in your account should you need additional support or protection in the future, with most home insurance providers giving you up to £1,000 in cash protection.
However, the Bank of England have twice lowered interest rates to stabilise the UK economy and encourage spending, down from 0.75 percent, to 0.25 percent and now at an all-time low of 0.1 percent. People are naturally asking, with interest rates so low, whether keeping cash in a savings account is still wise.
There is natural temptation to take out your money from your current account and find investments or other accounts that are higher yielding. With the rate of inflation likely to exceed current interest rates, you are currently losing money in real terms.
Your approach here is down to your level of risk. Of course, keeping your money in a current or savings account is not a bad strategy, it is the most secure, but also means you are not growing your savings.
Transferring your money to a different account with higher interest rates, such as Nationwide offering five percent interest to new customers, or searching out investments of varying risk is a great way to grow your money. Ultimately, this will depend entirely on your circumstances. If you are holding a high amount in a savings account, it is strongly recommended you look elsewhere to at least match inflation with most experts predicting favourable long-term results with smart investments.
As you are likely aware, the stock market recently took a hit with share prices significantly lower than at the start of the year. Assuming the company has the means to survive the crisis, now is a great opportunity to capitalise on the discounted prices of stocks available to you.
With construction starting up again across much of Europe, the property sector could be another area to turn attention to. Before the UK lockdown, property and its many forms of investment, such as loan notes or debt investing, were growing rapidly in popularity due to high returns and relative security. The property market saw a much smaller hit when compared to the stock market as a result of the lockdown, with recovery expected to be quicker too.
A case for calm
If you are not able to invest your money, your best option is to keep it in a bank account. After the 2008 financial crisis, the Financial Services Compensation Scheme (FSCS) was introduced to keep consumers money safe in the event of an economic downturn of closure of the bank.
The limit of £85,000 being protected is high enough for the average consumer. If you are holding an amount less than this, your money is secure. Keeping money on deposit is a priority for many in these times of uncertainty and is a bedrock for most people’s financial planning.
For those with large savings, there are some tips you can follow to offer you greater peace of mind if you are not comfortable investing. First off, you need to look at which financial institution owns your bank.
You can have savings with multiple banks of up to £85,000, but if the banks are owned by the same institution, you are only covered up to £85,000 total. If the banks are owned by different institutions, you are covered for all accounts.
Having considered this, if you have over £85,000 in an account, transfer this to another financial lender that is owned by a different institution. Alternatively, keeping the money in a joint account with another effectively doubles your limit, just be aware the joint party will have access to this money.
Some will be keeping one eye on overseas accounts, many of which offer higher rates of interest. It can get complex here and you should seek the advice of a financial manager. FSCS does not cover many accounts overseas.