I’m a savings dunce: don’t make the same mistake as me

Sitting back and expecting savings providers to pass on rate rises is a dangerous ‒ and potentially costly ‒ gamble.

Having a savings safety net is crucial for all of us.

It’s too easy for some sort of unexpected bill to land on our door. It could be a broken-down boiler or a car that needs repairs.

In my own case this year, it was having to get our entire roof replaced. 

Having savings built up means you can pay off the cost of that work without having to turn to credit. 

However, being disciplined enough to build up a savings pot is only the start.

We also need to think carefully about precisely where that money is kept.

How easy is it to access when necessary? And crucially, what sort of interest rate are you getting on the money in your pot?

After all, that interest rate will help your pot keep up with inflation and ensure that it continues to meet your needs in the years ahead.

The trouble is, it’s not something I’ve done a good job with. And so it’s important that you don’t make the same error as me. 

Manage all your savings accounts in one place with Raisin, the simple savings service

My mistake

I’ll confess, I have been a savings dunce.

I haven’t paid enough attention to the interest rates paid on our family savings account.

We have money set aside for emergencies and opted for an easy access account with Halifax, simply because we already had a joint account there.

This was a time of tiny interest rates so getting some sort of return on the money in there wasn’t really a priority.

But the interest rate situation has changed rather substantially of late.

The Bank of England has increased the base rate repeatedly over the last year in a bid to deal with stubbornly high inflation, to the point that it is now sat at 5%.

The markets are expecting further increases to come too.

Given that, you might expect that my easy access account at Halifax would be paying some sort of vaguely respectable rate.

Indeed, I took that for granted, which is why it came as an unpleasant surprise this weekend when I found that it’s paying just 0.85%.

Passing on Base Rate rises

It isn’t just Halifax that has been paying mediocre rates though.

A host of big savings names have been pretty slow in reflecting Base Rate rises in the interest paid on their savings deals, to the point that we have had the FCA ‒ the financial regulator ‒ urging them to do a better job in paying fair rates.

Last week the FCA said it had had a “constructive meeting” with savings providers, saying that it wanted to see providers “accelerate” their efforts in offering more competitive products.

It came after banks were accused by MPs of profiteering, given the rapid way that they have hiked interest rates on mortgages yet been slow in improving their sales deals.

As we have highlighted on loveMONEY previously, banks can be a little sneaky when it comes to doing so, forcing savers to actively request improved tastes or opting to launch a new ‘issue’ of a saving product with a higher rate, rather than improving the rates on existing deals.

It’s good evidence of why taking the apathetic approach ‒ as I did ‒ is not going to do you any favours.

Manage all your savings accounts in one place with Raisin, the simple savings service

Valuing your money

Ultimately banks make their money from people like me.

So long as savers simply take it for granted that they will get an acceptable rate then they have little reason to do anything about the rates on offer.

That’s why it’s so important for us all to be more proactive, to show how we value our own money and so strive to get a better return.

It’s what we’ve done now, moving our savings stash to Shawbrook Bank.

We still aren’t getting a rate that beats inflation ‒ sadly that simply isn’t possible at the moment ‒ but at least our money is growing in pure pounds and pence. 

And it sends a message to those banks who continue to drag their heels.

If they don’t speed up and pay a fair rate, they won’t enjoy our custom. 

Be sure to keep an eye on our round up of the savings deals paying the best rates of interest.