Finding an Alternative to the Best Savings Rates
We all like to have money, that’s a given. We also like to spend money. For many though, growing your money and keeping it as a readily available supply is easier said than done. In order to accumulate wealth, you have to express a desire to grow it and not blow it. That being said, saving money is something that is universally achievable. These days, most people save their money by using a savings account. The days of shoving wads of cash under your mattress are well and truly over (for the most part!). Unfortunately, many of us don’t take as much interest -no pun intended- as we should when figuring out the best savings rates. Providing it’s safe and secure-we’re usually content. For those concerned about getting the best bang for their buck, however, there’s good news. There are better rates out there, all you have to do is look. Sometimes, despite our best efforts, we’re oblivious to what’s right in front of us, including the best savings rates. We all save for different reasons, short-term goals, long-term goals, or even just splashing out on the odd indulgence. Did someone say spa break?
Skipton Building Society note that 38% of 25 to 34-year-olds are already saving for their future, whereas one in 10 over the age of 55 haven’t saved a penny! Whilst obviously subjective, saving is always a sensible idea. The more you have put away, the less you have to worry about in case something goes wrong. Sometimes things don’t go to plan, you may want to explore a new business venture or even just splash out. Savings are handy to have, no matter your circumstance.
Kris Brewster of Skipton Building Society recently commissioned a survey that delved into the state of saving in the UK. He stated:
“Having a healthy savings account is something everybody dreams of, whether its money put aside for a rainy day, helping fund your child through university or money saved for comfortable retirement.”
However, with inflation currently at 2.5% it’s relatively hard for people to find themselves an account that pays enough to protect money from losing its value. Whilst there is plenty of choice on the market (nearly 800 savings account providers) only a small handful of these can beat or match the inflation rates. Even the best savings rate just pips the post.
So where can you find the best savings rates? Take a look!
Moneysupermarket reports that these are the top performing savings accounts at current
|PROVIDER||RATE (AER VARIABLE)||MIN/MAX DEPOSIT|
|Bank of Cyprus UK||1.34% (incl fixed 0.49% bonus for 12mths)||£1/£1 million|
|AA Savings (2)||1.3%||£100/£2 million|
Investing vs saving
So now we know all about saving, how does it compare to investing? What’s the difference anyway?
Saving is best suited to those looking for short to medium term goals. Investing is better suited to longer term goals. To save implies that you are gradually adding money to a fund over time. Investing may be understood as supplying money or capital to an endeavour whilst expecting to generate a financial return.
Investing is a diverse arena and offers people the opportunity to put their money behind a myriad of different options. From stocks and shares to bonds, the world of investing is varied and exciting. One means of investment that is continuing to gather momentum right now, is alternative investment.
Alternative investment can be seen as a viable substitute to stocks & shares and other traditional means. With the exclusion of the middleman, you are granted more control over your money and how you use it. An alternative investment is generally concerned with assets that are not considered typical, such as private equity or property.
Just like regular investing, alternative investment allows you to generate capital from your existing funds and gradually grow your money. Whilst savings accounts generally strive for the same goal, the rates are comparatively weaker (by a long shot). For the most part, those who invest through alternative investment platforms will be able to experience superior rates. For example, the average interest rate available from The House Crowd’s P2P loans is 9.2%.*, some 6 times more than what the highest traditional saving accounts can currently offer. Of course, the flip-side to this is that, as with all investments (and in contrast with a savings account), your capital is at risk when you invest in alternative investment platforms. You can read more about this relationship between risk and reward here.
One other crucial difference between saving and investing is the level of protection available.
Traditional savings accounts offered by the banks are subject to protection from the FSCS, a service that offers up to £85,000 in compensation to those who withhold their money inside a designated company’s account. When you invest through alternative finance, however, you aren’t provided with the same protection. On the other hand, companies like The House Crowd have a living will agreement in place, meaning that in the unlikely event of insolvency, another FCA regulated company will take over the business and implement contingency plans. From here investors’ money will be returned to them as soon as possible.
All in all, determining your preference on saving or investing should be a matter of considering your comfort with being exposed to risk. Look for a rate that best reflects your own individual needs and caters to your own requirements. By doing this you can identify the best savings rates for you, and not someone else.
*Average net return paid out to investors on peer to peer loans from 2015-2018. Average net return by year (no loans repaid in 2015): 2016 = 8.8%, 2017 = 9.7%, 2018 = 8.9%, Remember, past performance is not a reliable indicator of future performance. Property values can fall. Your capital is at risk & returns may vary. Read our risk warning and our important information page.