At a time when the coalition government has been calling for the nation to adopt a culture of saving, figures from the Office for National Statistics suggest that one in ten people in the UK has given up on saving all together due to the rate of inflation.
Head of banking at Moneysupermarket.com, Kevin Mountford, commented on the situation, saying that “with cuts in benefits, rises in national insurance contributions, the lowering of the higher rate tax threshold and the general increases in the cost of living, many Brits are feeling the squeeze.
“Unfortunately, savings become one of the first casualties when people have to tighten their purse strings.”
Despite the recent drop in inflation from 4.4% to 4.0%, the low interest rates and lack of efficient savings accounts on the market mean that even if people find themselves with money to save, they will still struggle to find an effective way to do so. In 2011, all of the combined factors such as the inflation rate, the VAT increase and the general high cost of living, has caused one in ten savers to give up their saving strategies.
However, Mountford believes that there are still reasonable accounts on the market. He stated that “those savers who have stopped saving because they believe rates are too low for switching to be worthwhile are missing out on some of the best rates we have seen since base rate dropped to record lows.”
He also has a piece of advice for those who are still in a position to be saving their money: “If you are prepared to lock away your money for five years, then you can get a rate as high as 5% – ten times higher than that of base rate.”
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