This month Andy Webb offers his advice on maximising your savings, and avoiding losing out on the best ways to save
Interest rates on savings have struggled to match inflation for a long while now. Essentially the cost of living is growing faster than any money you make on cash savings which means your money is losing value in real terms. And the lower the interest that you’re earning, the more money you’re losing.
But this doesn’t mean saving is pointless. Do it right and it is possible to beat inflation. So this month I want to take you back to basics and help you rethink your savings strategy.
STEP 1: USE YOUR SAVINGS TO PAY OFF DEBTS.
If you have any debts then it’s more than likely that the interest you’re paying on them is higher than what you’re getting on your savings. So it makes sense to use your savings to wipe out those debts. If your debts are bigger than your savings, prioritise the most expensive debts.
You might be concerned that doing this means you don’t have any cash available for emergencies. But the savings you make should help you start rebuilding that pot—and in an emergency you can look to credit cards and loans.
STEP 2: FIND OUT THE RATE OF INTEREST YOU’RE EARNING.
Now, for any savings left after the first stage check what interest rates they’re earning. It’s very possible it’s a lot less than you think it is. In part this could be down to the rate being variable. Very few accounts have seen rises, but many have seen falls. Or it could be because you got a bonus rate for the first year, and it’s subsequently dropped.
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