Happy New Year For Savers

Savings and ISAs

Updated on 16 December 2008 | 0 Comments

As the economic outlook gets more gloomy, it looks like Brits are saving more than usual in January.

Brits are saving more into building society savings accounts.

Last month the net inflow into building society savings accounts was £591m. That's the largest January inflow since 1997. Seven out of the last ten years saw a net outflow.

Why is this?

I think there are 4 main reasons:

  •         People are concerned about prospects for the economy, so they're trying to build a financial cushion for the future.
  •         The stock market is falling and private investors are looking for greater security by selling their shares. The proceeds then go to savings accounts.
  •        In the aftermath of the Northern Rock crisis, some savers may prefer to put their money in old-fashioned building societies rather than banks.
  •         Savings rates are higher than usual when compared to the Bank of England's base rate. Read more on this here.

What should you do?

Well, if you have any spare cash, I certainly think it makes sense to save. More savings means greater security in tough times.

Bank or building society?

I'm not too bothered about this distinction. I think the best policy is to go for the best savings rate.

My two favourite savings accounts at the moment are the Northern Rock Tracker Online and the Kaupthing Edge Savings Account. Northern Rock pays 6.49% a year AER while Kaupthing pays 6.5%. Remember that Northern Rock should be an ultra-safe home for your savings now that it's owned by the government.

>  Compare Savings Accounts at The Fool | Is Saving With Icelandic Banks Safe?

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