Life
Money maven: Where's the best place for my rainy day money?
As interest rates rise, our personal finance expert looks at the best savings accounts
December 17, 2021 07:47
As interest rates rise, our personal finance expert looks at the best savings accounts
December 17, 2021 07:47
Although I have money invested in the stock market, I like to keep the equivalent of a couple
of months’ wages in cash just in case. My bank is currently offering 0.01
percent on its easy access savings account, but with inflation at 4.2 percent
the value of my money is falling. Are there any savings accounts that pay the
equivalent of inflation with easy access or anything close?
A .The simple answer is no, unfortunately not. While borrowers may love the current low
rates, savers, as you rightly say, are seeing the value of their hard earned
cash fall day by day. Even yesterday’s base rate rise to 0.25
percent will do little to help, as inflation has also risen since you wrote to
me earlier in December to 5.1 percent. But you are absolutely right to keep some
money in cash, just in case the boiler blows up or you lose your job. Experts
recommend savings equal to three-to-six months of your take home pay as a rainy
day emergency fund.
Even the best of the easy access funds pay less than one per cent, though higher than your bank
is currently offering you.
At the time of writing none of the banks and buildings societies had reacted to the unexpected base rate increase, but these rates are likely to change over the coming few days so it
is worth checking on sites such as moneyfacts.co.uk and savingschampion.co.uk
before you invest your money. Investec paying 0.71 per cent on its Online Flexi Saver for balances of £5,000 plus tops the table.
The next best payer is Cynergy Bank paying 0.7 per cent on £1 and above. The third is
Tesco Bank Internet Saver paying 0.69 per cent on £1. It is opened online but
can be managed both online and via mobile banking. The other two accounts are
opened and managed online.
If you are relaxed about tying your money up for a period of time, then the rates are
marginally higher. Secure Trust Bank has a 60 day notice account paying 0.85
per cent on £1,000 plus, which is opened online but can be run online or by
phone. Alternatively Charter Savings Bank pays 0.83 per cent on £5,000 and
above on its 60 day notice account. It has a version that is run via the post
as well as online. If you can tie up your money for longer, Secure Trust Bank
also has a 90 day notice account paying 1.02 per cent on £1,000 and above, that
is run the same way as its 60 day account.
The other alternative is to put your savings into a cash Isa, up to £20,000 in the
current tax year ending 5 April 2022, and let the money grow tax-free.
The downside is that if you have to withdraw the money, it cannot be replaced once the maximum is reached. The top pick easy access Isa is currently offered by Shawbrook
Bank, paying a tax free 0.67 percent on £1,000 plus — remember you have to pay
tax on the interest earned on the other accounts. The account is opened online
but can be managed by phone as well. Cynergy Bank and Paragon are both offering
0.65 percent on £1 and above opened and managed online.