Savings Accounts Can They Keep Ahead of Inflation

Not all savings accounts are created equal and this is very bad news for the investor that is trying to stay ahead of the game. You must understand how the cost of living and the rise of inflation will affect your living both today and tomorrow. Most people have a savings account for retirement purposes or an emergency fund. However, if the interest paid is very small or without enough funds in it the amount of interest you can get is paltry. When your interest rate is very low you can expect only pennies to be paid in interest over the course of a year. What kind of emergency or type of retirement will you have if this is your only source for such things? If your money won’t buy as much as it once did you are backing up instead of going forward.

The government has a measure for inflation and it is known as the Consumer Price Index or CPI. When it was checked in January it was showing a mere 2.2%, but how accurate is this really. The Retail Prices Index or RPI registers 4.1% which is about double the CPI. Why such a disturbing difference it is because they measure different things. The CPI doesn’t factor in such things as the costs of food, housing and the rising cost of energy. This makes a substantial different in how inflation is perceived. It almost gives you a false sense of security. What does this mean for your savings over time?

You will most likely want to find an account that would pay up at least that much in interest or more. You usually pay taxes on any monies in your savings account and this will need to be taken into consideration. This will take more money away from you and most people will pay approximately 20 percent to the HM Revenue & Customs. As you can see this makes savings accounts that pay very little interest on you money very poor indeed. It is very hard to get ahead when these problems exist. You might want to look into the tax-free interest that you can receive with an Individual Savings Account or ISA’s.

It pays to do your research homework when looking for the best savings accounts out there. A few that seem to be leading the rest are ICICI Bank HiSAVE with an interest rate of 6.41 for as little as £1+ this has great possibilities. The other side of the coin rests with other banks that pay nothing on very small amounts take Alliance & Leicester Instant Access they pay nothing up to £99. Darlington BS Instant Access is little better as they pay only 0.10 percent up to £249.

Everyone wants to be able to protect their money and see it grow so make sure that the banking institution that you choose has the same goals that you do. Research and ask as many questions as you can until you are satisfied.

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