Lower savings interest rates require new plans

Do interest rates bother you? Plan now.

08:06 23 December 2013

If you have been trying to stash money in a savings account, you may have noticed that the interest rates are significantly lower than they were previously. Government lending programmes are being blamed, but in the meantime, many people trying to meet savings goals may need to re-evaluate their savings plans. If you simply need emergency funds, the regular savings may be sufficient, but otherwise consider a few alternatives:

• Diversify—you have no doubt heard the phrase a few times. You do not need to stop putting money in a regular savings completely, but now is the time to think about setting up some higher-risk funds in addition to the lower-risk investments. This should help keep your growth going, even when interest rates drop a bit.

 

• Property—if you have the ability, investing in property can be a great way to ensure financial security in the future. You can invest in homes for fixing and selling, or use them as a source of rental income.

 

• Independent Savings Accounts—if you have wondered about a Stocks and Shares ISA now is probably a good time to try it out. The funds you invest in a Stocks and Shares ISA come with a higher risk than a Cash ISA, but because they are linked to the market, they also may allow you to earn a better return.

 

• Comparisons—with lenders losing accounts right and left, you may be able to find some banks with better rates. Check out fixed rates, and accounts that offer the best possible interest rate. Keep in mind that taxes and inflation should ideally be offset by the amount of interest your savings account earns.

 

• Business ventures—do not forget to be a little creative with investments. You may be able to invest in a start-up business, and make a significantly higher return rate.

Don’t get discouraged by the low savings interest rates, just re-evaluate your savings strategy.