Britons could boost savings by £1,000 in two years and beat inflation with simple switch | Personal Finance | Finance

Britons have been urged to consider investing their in stocks and shares as they could boost their savings by almost £1,000 in just two years.

Figures from True Potential showed with the average savings account containing a balance at £17,365, if this was invested in the stock market with an average return of seven percent, by 2026 this amount could grow to £18,338.13 when adjusted for inflation.

Comparing this with keeping the funds in a savings account, the firm said that with inflation predicted to be between 4.6 percent and 1.5 percent from 2024 to 2026, just keeping the cash where it is “will not make up that difference”.

CEO of True Potential, Daniel Harrison, said: “The reluctance to invest often comes from a lack of confidence and understanding of stock markets, which is understandable because we aren’t taught this in schools.

“The result can be that people choose to invest in risky un-regulated things such as crypto currencies instead of the company they might even work for, like those listed on the FTSE 100.

“It’s also crucial to recognise that inflation can erode the value of savings significantly over time. Taking proactive steps toward investment and seeking professional advice can mitigate these risks and potentially safeguard one’s financial future.”

The Bank of England chose to hold the base interest rate at 5.25 percent in its latest decision last week, with many savings providers dropping their rates already.

Savers may also want to consider locking in a fixed rate before they start to fall. Sarah Coles, head of personal finance at Hargreaves Lansdown, said previously: “If you don’t need the cash for a year or more, you may be tempted to hold it in a variable rate account for a higher return in the short term.

“However, in the coming months, there’s a very high chance that rates will fall, so if you don’t need the cash right now, fixing and guaranteeing the return for a year or more may well prove more rewarding.

“These fixed rates have fallen, but there are still plenty of deals over one and two years offering more than five percent right now, so there are great rates worth snapping up while you can.”

At the time of writing, there are several banks offering rates above five percent for one-year fixed rate bonds.

When the latest base rate decision was due to be announced, the Institute for Economic Affairs (IEA) ured a drop to ward off stagnation.

The IEA’s Shadow Monetary Policy Committee (SMPC) feared that rates remaining at this historic high will damage the UK economy and recommends lowering them from 5.25 percent to five percent.

Trevor Williams, who chairs the SMPC, said: “The latest data suggests that the economy likely avoided recession in the last quarter of 2023, but only just. At best, the UK economy grew by around half a per cent in 2023. This pace of growth offers no threat to inflation.”

For the latest personal finance news, follow us on Twitter at @ExpressMoney_.

Source link