Low interest rates on savings

[kabbes]

Can you explain how it would half? Due to inflation? I don't really understand it fully. I have all mine in a low interest account at the moment but it's only been in there a for a month so not a big deal. I need to access it.

I advise anyone to sign up to the money saving expert email as they constantly update on changes.

Not sure what you mean by half? And if you might need the money in a hurry, it isn’t the way forward.

To invest in funds, you just choose a platform (equivalent to choosing a bank) like the Interactive Investor or Hargreaves Lansdowne — the one to choose is the one that will charge you the least for your level of investment — and then just use their website to transfer some money and buy a fund. It’s very straightforward, I promise!

 

[ATOMIC SUPLEX]

Everything's taken a massive hit due to COVID. Don't lock your money away for more than a year, in case things get better, unless you can afford to.

I got the same email today, exactly the same rates. Maybe from the same bank (smile). These are the savings and ISA rates, not even the current account (that delivers zero interest). The low low interest has been like this since before covid, it's plummeted hard since the brexit announcement.

 

[BristolEcho]

Not sure what you mean by half? And if you might need the money in a hurry, it isn’t the way forward.

To invest in funds, you just choose a platform (equivalent to choosing a bank) like the Interactive Investor or Hargreaves Lansdowne — the one to choose is the one that will charge you the least for your level of investment — and then just use their website to transfer some money and buy a fund. It’s very straightforward, I promise!

Sorry I quoted your wrong post and then used the word half when that wasn't what you said. Just finsihed work so forgive me.

I am with you now!

 

[alex_]

A variety of funds that performed with more or less success. Broadly, though, yes. The UK has performed worst of the developed nations over the last five years thanks to Brexit and COVID and funds with a little bit of focus on selection have done better than the pure tracker but even the basic FTSE all-share has managed about 6% per year on average over the last five plague- and Brexit-infested years (look down the page at the trailing return for this info).

Vanguard FTSE U.K. All Share Index Unit Trust GBP...|GB00B3X7QG63

Fund price for Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc along with Morningstar ratings & research, long term fund performance and charts

www.morningstar.co.uk

Remember that buying stocks means getting a dividend (average UK dividend tends to be about 3% per year) before even allowing for any growth. And in the neoliberal hell we call the modern world, the game is totally rigged in favour of capital, ie companies. So it’s no great surprise to find that investing broadly in companies tends to produce a positive result.

Note that there are individual years with double digit negative returns though. That’s why you don’t invest in the stock market if you might want your money out in a hurry! Having the luxury to time an exit for when things are on the higher rather than lower side makes a big difference.

yes look at the returns on some of these over 5 and 10 years https://www.trustnet.com/fund/price...r=VNUK&pageSize=50&sortby=P36m&sortorder=desc

 

[weltweit]

..
What's better than an ISA? (Don't say Bitcoin or shares in Gamestop.)

AnnO'Neemus have you got decent pension provision? If you haven't a pension isn't a bad place to put money.

 

[Edie]

I had to teach myself all this shit a few years ago. Before that I had zero idea.

Read these ten points from Martin Lewis from MoneySavingExpert to understand the basics:

Investing for beginners

MoneySavingExpert guide shares the 10 things you need to know about investing, including where to buy, and how much risk to take.

www.moneysavingexpert.com

Choose a platform (investment company). Money saving expert recommend a few. I didn’t know any better so went with that. They will then have an online tool that asks you a bunch of questions about your attitude towards risk, whether you want it ethical. Then it recommends a fund.

I have a medium-high risk fund from Nutmeg (that’s the platform). It’s returned an average of 12% (11.82%) over the past two years.

Remember the five golden rules:

1. The greater return you want, the more risk you'll usually have to accept.
2. Don't put all your eggs in one basket. Try to diversify as much as you can to lower your risk exposure, ie, invest in different companies, industries and regions.
3. If you're saving over the short term, it's wise not to take too much of a risk. It's recommended you invest for at least five years. If you can't, it's often best to steer clear of investing and leave your money in a savings account.
4. Review your portfolio. A share might be a dud or you might not be willing to take as many risks as you did before. If you don't review your portfolio regularly, you could end up with a share account which loses money.
5. Don't panic. Investments can go down as well as up. Don't be tempted to sell or buy shares just because everyone else is.

Good luck. This stuff isn’t just for rich people. If you want to save for a period of 5 years or more you’d be a fool to use a cash isa.

 

[Edie]

By the way, I have now taught my kids both this (in fact now they’re way ahead of me). But it obviously didn’t occur to anyone at home or school when I was a kid or young adult to even mention how to save money. I had literally no idea until my late 30s (after divorce).

I didn’t even understand the basics of compounding (ie saving!!). (If you don’t this video is excellent):


I’ve now become certain that kids should be taught this stuff and even spoken to my lads mates about the importance of it. My one mantra used to be ‘don’t get in debt’. It’s now ‘don’t get in debt, and save regularly from the start’.

 

[DownwardDog]

Received an email from my bank saying that they're going to be reducing the interest rate on their 'Online Cash ISA' accounts.

Tbh, I didn't have a clue what the current rate was, so just checked: 0.15%. And it's going down to 0.09%.

If I'd had to guess, I was vaguely aware interest rates were low, so I'd have said maybe the interest rate was 1%. I had no idea they were so dire.

I've always tended to be shit with money, but currently have a small amount of savings in an ISA, because I 'knew' ISAs were supposed to be good, or at least better than keeping your money in a current account.

But 0.09% is dreadful. That's effectively losing value/money on savings, because inflation on food and bills is running higher than that. So my savings won't be earning money, the money will be depreciating in value.

What's better than an ISA? (Don't say Bitcoin or shares in Gamestop.)

25% cash with whatever horrible exchange rate you can get
25% tech ETF
25% FTSE index tracker
25% high yield ETF

Leaving your money on deposit in a bank is just one step up from burning it.

 

[kabbes]

Following on from Edie’s video — that’s why it makes a big difference to pick what you invest in carefully. If you get a savings account with 1% interest, your fund will be 10% higher after 10 years. If you have a share account that achieves 7% per year, you’ll have doubled your money. That’s a huge difference.

 

[A380]

I have some long term money in a Tridos stocks and shares ISA. It’s an ethical investment fund if that’s important to you. They often perform at the higher end of lower risk products too.

they have different products and, I think, you can still choose what kind of fields you do or don’t want your money invested in. Stocks & Shares ISA | Ethical Investments | Triodos Bank

 

[Edie]

Following on from Edie’s video — that’s why it makes a big difference to pick what you invest in carefully. If you get a savings account with 1% interest, your fund will be 10% higher after 10 years. If you have a share account that achieves 7% per year, you’ll have doubled your money. That’s a huge difference.

It’s also not intuitive. So unless you are told this you probably wouldn’t know.

How did other people find out about all this? Was it handed down by parents, taught at school, or did you just figure it out at a much earlier age than me?

 

[kabbes]

It’s also not intuitive. So unless you are told this you probably wouldn’t know.

How did other people find out about all this? Was it handed down by parents, taught at school, or did you just figure it out at a much earlier age than me?

I can’t speak for others but personally I was hothoused in maths by ambitious working class parents of immigrant backgrounds from the age of 2. Probably something to do with that.

 

[strung out]

It’s also not intuitive. So unless you are told this you probably wouldn’t know.

How did other people find out about all this? Was it handed down by parents, taught at school, or did you just figure it out at a much earlier age than me?

I only got into this stuff about 3 years ago. Stumbled across r/UKPersonalFinance and figured it all out from there. I'm thankful I found out when I was 34 rather than 54, but it makes me wonder how much I'd have been able to save if I'd started at 24 or earlier.

 

[farmerbarleymow]

It’s also not intuitive. So unless you are told this you probably wouldn’t know.

How did other people find out about all this? Was it handed down by parents, taught at school, or did you just figure it out at a much earlier age than me?

Do they run banks at schools these days, and banks offer accounts aimed at kids? I remember they got us all to open accounts when we were young - possibly in later years of primary school - so we could save our pocket money. I think the bank sent staff to schools to do the admin stuff. I remember having accounts at TSB and Yorkshire Bank back then, but then closed them and moved to another bank when I was about 12 (which I'm still with).

 

[Gromit]

If you don't want to teach yourself stocks and shares to run your ISA there are robot pickers such as Nutmeg that will do it for you.

I do my own.

ETA oh I see someone already said nutmeg.

 

[Elpenor]

Reading this thread makes me wonder if I should have done something different with my house sale proceeds.

It’s quite a significant amount of money but I intend to use it as a deposit on a house by the end of the year or so, and I don’t currently have a permanent address to set up an account with a fund platform.

 

[strung out]

Reading this thread makes me wonder if I should have done something different with my house sale proceeds.

It’s quite a significant amount of money but I intend to use it as a deposit on a house by the end of the year or so, and I don’t currently have a permanent address to set up an account with a fund platform.

If you need the money by the end of the year, just stick it in something like Premium Bonds or Marcus. Zero chance of losing money and you'll either get the tiny chance of a big win with Premium Bonds, or a guaranteed 0.5% interest with Marcus.

 

[platinumsage]

I have some long term money in a Tridos stocks and shares ISA. It’s an ethical investment fund if that’s important to you. They often perform at the higher end of lower risk products too.

they have different products and, I think, you can still choose what kind of fields you do or don’t want your money invested in. Stocks & Shares ISA | Ethical Investments | Triodos Bank

They look to be high risk with low performance to me, but I guess their ethical policy inevitably results in that, otherwise everyone would be ethical. Interesting that Nike and Starbucks are included, I guess most things could be unethical if you took it too far.

 

[Elpenor]

If you need the money by the end of the year, just stick it in something like Premium Bonds or Marcus. Zero chance of losing money and you'll either get the tiny chance of a big win with Premium Bonds, or a guaranteed 0.5% interest with Marcus.

Thanks, as much as possible is with Marcus. I may look into Premium Bonds.

 

[Winot]

Thanks, as much as possible is with Marcus. I may look into Premium Bonds.

£50K max. As said above, very low return on average but (tiny) chance of massive win.

 

[Winot]

It’s also not intuitive. So unless you are told this you probably wouldn’t know.

How did other people find out about all this? Was it handed down by parents, taught at school, or did you just figure it out at a much earlier age than me?

My dad was a bank manager. Old style (wc grammar school boy - worked in the bookies before the bank).

 

[tommers]

Nobody has mentioned paying off your mortgage yet, if you have one. 3% over 30 years or whatever adds up. Good to reduce the amount you owe as quickly as possible (and take advantage of low rates, who knows what will happen in 10 years' time).

 

[Part 2]

I've got a good wage at the moment but only plan to work for another couple of years. I could save 50% of my wage every month for the next 2 years.

I've been told about AVCs through work which sounds alright because I'd be able to get the money back in 4 years time. The return on that sounds better than anything I could hope to get anywhere else...is that right?

 

[Winot]

Nobody has mentioned paying off your mortgage yet, if you have one. 3% over 30 years or whatever adds up. Good to reduce the amount you owe as quickly as possible (and take advantage of low rates, who knows what will happen in 10 years' time).

Isn’t the other way round? If the interest you’re paying on the mortgage is low then it’s better to put the money into a tracker because the returns are likely to be higher than the interest you are paying.

(Obviously depends on your appetite for risk and your income stability)

 

[tommers]

Isn’t the other way round? If the interest you’re paying on the mortgage is low then it’s better to put the money into a tracker because the returns are likely to be higher than the interest you are paying.

(Obviously depends on your appetite for risk and your income stability)

Yes but your mortgage is usually a higher rate than you're going to get from an ISA or savings account, it's a fixed recurring monthly charge that you have to pay each time (there's no choice) and whenever you pay down the capital it reduces the amount of interest you are giving the bank each month (so you are then paying off more of the capital in your monthly payment forever, and reducing the interest even quicker etc etc). Plus, rates are low now (and have been getting even lower for ages) but that might change and its better to owe as little as possible if that happens.

(and I just hate owing banks money).

So yeah, you're right that you can probably make more by sticking it in stocks or whatever but you're actually reducing risk and liability by reducing that amount instead IYSWIM.

 

[Idaho]

It’s also not intuitive. So unless you are told this you probably wouldn’t know.

How did other people find out about all this? Was it handed down by parents, taught at school, or did you just figure it out at a much earlier age than me?

For some inexplicable reason i actually read the detailed booklet I was sent when my firm changed over our pensions from a really good guaranteed benefit scheme, to the usual "you now must gamble to fund your old age" scheme. I think my innate cynicism about my employer and the likelihood they were giving us all the shitty end of the stick motivated me.

It struck me then that there are people who make a study of this boring crap, and do well from it, and the majority who (quite reasonably) aren't at all interested, and basically get robbed blind in the long term by paying constantly over the odds and being funneled into crappy investment products.

 

[Winot]

Yes but your mortgage is usually a higher rate than you're going to get from an ISA or savings account, it's a fixed recurring monthly charge that you have to pay each time (there's no choice) and whenever you pay down the capital it reduces the amount of interest you are giving the bank each month. Plus, rates are low now (and have been getting even lower for ages) but that might change and its better to owe as little as possible if that happens.

(and I just hate owing banks money).

So yeah, you're right that you can probably make more by sticking it in stocks or whatever but you're actually reducing risk and liability by reducing that amount instead IYSWIM.

Yeah definitely worth paying off for those reasons.

 

[Edie]

For some inexplicable reason i actually read the detailed booklet I was sent when my firm changed over our pensions from a really good guaranteed benefit scheme, to the usual "you now must gamble to fund your old age" scheme. I think my innate cynicism about my employer and the likelihood they were giving us all the shitty end of the stick motivated me.

It struck me then that there are people who make a study of this boring crap, and do well from it, and the majority who (quite reasonably) aren't at all interested, and basically get robbed blind in the long term by paying constantly over the odds and being funneled into crappy investment products.

Yes! But you don’t have to make much of a study, that’s the thing. If all you do is read Martin Lewis 10 rules, and use an online fund selector tool by a reasonably well known platform, and then leave it the fuck alone then that’s better than cash*.

*disclaimer: obviously there remains a risk, even with a well diversified and low risk fund, that it won’t be better than cash.

 

[Idaho]

It's an interesting question re mortgage. My mortgage is currently about £80k and will be paid off in 9 years. It's charging me 1.7% interest a year and that's fixed for the remaining term. If I got £80k somehow, I'm not sure I'd pay it off. Inflation is threatening to go much higher than 1.7%. I'd be tempted to let inflation gnaw away at it and try and chase a better return with the money.

 

[Edie]

It's an interesting question re mortgage. My mortgage is currently about £80k and will be paid off in 9 years. It's charging me 1.7% interest a year and that's fixed for the remaining term. If I got £80k somehow, I'm not sure I'd pay it off. Inflation is threatening to go much higher than 1.7%. I'd be tempted to let inflation gnaw away at it and try and chase a better return with the money.

Could you offset?