With two-thirds of instant access accounts paying less than inflation, we show you the accounts which guarantee your cash will really grow.
This article has already been sent to readers as an 'afternoon' email.
I don't know if you've looked out your window lately - but it's pretty dismal outside.
But whether you made it into work today, or were fortunate enough to stay at home, many of us will still be thinking about the best place to save for a rainy - or in this case, snowy day.
Savers have had a hard time in recent months, and have borne the brunt of the interest rate cuts. However, rubbing salt in this wound is the fact that, according to data from Moneyfacts, two-thirds of instant access accounts pay less than the current rate of inflation.
What is inflation?
In the simplest terms, inflation measures past price rises. So, with annual inflation at 3%, goods which cost £100 last year now cost £103.
It's important that your savings keep pace with inflation and the rising cost of goods. If you fail to do so, while the actual amount of money in your account won't actually go down, its value, or purchase power will.
Although the Bank of England uses the Consumer Prices Index (CPI) as its inflation target, many view the Retail Prices Index (RPI) as a more realistic measure, as it takes into account costs such as council tax and mortgage interest.
So, with the current RPI standing at 0.9%, a basic rate taxpayer would need to earn 1.125% before tax on their savings in order to keep pace with inflation.
Not much of a tall order you may think, but looking at data from Moneyfacts this morning, I found a staggering 329 out 531 available variable rate savings accounts pay less than this rate.
This means that in real-terms, nearly two-thirds of available savings accounts (62%) don't help your money to grow. In fact, by having your money in one of these accounts, it is actually eroding its value.
Deflation
It's true that falling house and commodity prices has seen inflation also in decline, and Emma Davies argues that some of us should be more worried about deflation than inflation.
But in the mean time, like time and tide, inflation waits for no man, and it's time to act now to make sure inflation doesn't eat away at your hard-earned cash.
Here are the top instant access accounts, all of which beat RPI inflation:
| Provider and account | Interest Rate (AER) | Minimum Balance | Notes |
|---|---|---|---|
| Tesco Internet Saver | 3.6% | £1 | n/a |
| Citibank Flexible Saver Account Issue 4 | 3.56% | £1 | Rate includes a 1.61% bonus, payable for 12 months |
| ICICI Bank UK HiSAVE Savings | 3.55% | £1 | n/a |
| Ulster Bank eSavings | 3.51% | £1 | n/a |
| ING Direct Savings Account | 3.5% | £1 | Rate includes a 1.46% bonus, payable for 12 months |
| Egg Savings Account (Internet) | 3.5% | £1 | Rate includes a 2% bonus, payable for 12 months |
If I told you this time last year that a savings account paying 3.6% would be the sexiest account on the market, you'd have probably laughed in my face.
But in today's uncertain climate, Tesco's Internet Saver has emerged as the current market leader, and pays 3.6% on balances from £1.
It's also interesting to note that half the savings accounts above are boosted by some form of introductory bonus, with the most notable of these being the Egg Savings Account, which includes a mighty 2% bonus, payable for one year.
Ordinarily, we'd tell you to stay away from these types of accounts. However, with interest rates at a record low of 1.5%, this article explains why getting an account with a bonus may be worthwhile after all.
NS&I also has a range of products specifically designed to keep ahead of inflation (although some may argue that with the CPI now higher than the RPI, these accounts are also pretty poor value). Jane Baker examines these and other NS&I products in this insightful article.
Whatever you decide to do with your savings, it's important not to ignore inflation. RPIs and CPIs may not be at the forefront of your mind when choosing a savings account, but inflation is the silent killer of savings returns, so don't become another victim.
More: Earn 6% Interest On Your Spare Cash / Saving For Children