Money in the bank will actually cost you money!

By Kieran Drew
In January 6, 2017
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It has recently been reported that £10,000 held in a high street savings account will be worth £9669 in just two years’ time. In effect costing you £165.50 per year just to hold the cash!

This projection uses an average interest rate of 0.76% for a fixed-rate 2-year account, which means while your money is costing you money, you can’t even spend it! If the prediction was based on an easy-access account, then the average interest rate drops to 0.65% and your £10,000 after 2 years will be worth £9848, costing you £76 per year.

This loss over the 2 years is due to inflation; that is, your money will be worth less in the future if the interest rates are not high enough to produce some growth. Actually, to break even you need to make 2.44%, not including fees, etc., and you will not get anywhere close to this for cash deposits on the high street.

For long-term savers this could add up to a massive loss over time and could mean that your savings are slowly eroding to be worth much less than what you deposited in the first place.

Whilst holding some cash on deposit for emergencies is wise, holding large amounts of cash in this time of low interest rates makes no sense. If you have large cash deposits you need to re-evaluate your situation and take action now to avoid your savings being eaten away.

Disclaimer

Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. Past performance is not a guide to future performance. Tax rules can change at any time.

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 The opinions contained within this blog, do not constitute financial advice and no action should be taken based on this content alone.

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Redwood Financial Family Wealth & Estate Planners Ltd is Directly Authorised and regulated by the Financial Conduct Authority. FRN number 774469.

Disclaimers

The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto-Enrolment, Tax Advice and Estate Planning. Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK. https://register.fca.org.uk/

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