Are you paid into your existing account and then just leave it?moneyStay there? You're decreasing the worth of your money if you do. R...
Are you paid into your existing account and then just leave it?moneyStay there? You're decreasing the worth of your money if you do.
Recent figures indicate that in the UK, 6.4 million active bank accounts hold £10,000 or more – implying that this money is not generating any interest. However, even if your savings are below £10,000, that doesn't mean you should stop paying attention.
Experts claim that keeping more than £1,000 in your checking account is effectively equivalent to losing money. Just 0.04% of checking accountsbeat inflationBy earning 4% or more – most people do absolutely nothing, resulting in the decline of your money's value.
Derek Sprawling, head of funds atSpring, who is responsible for this data, statesArticlepedia TodayA current account is meant to be used for daily expenses, rather than as a storage solution for significant amounts of money over an extended period.
Consider your current account as your digital wallet – created for ease of use, not for keeping money. You wouldn't take £2,500 in cash to thesupermarket, so why keep it inactive in a current account? Consider it as a transit area for your funds, not a final destination.
Ideally, you should maintain a balance of £500 to £1,000 in your checking account, according to Derek, who refers to this as a reasonable sum to handle everyday bills and provide a cushion for unforeseen costs.
'Anything beyond that might be better utilized elsewhere. With interest rates on numerous current accounts significantly lower than inflation, surplus funds are losing value in real terms,' he states.
Remind me...what is meant by inflation?
Inflation means a widespread increase in the prices of goods and services. The reverse is deflation, which indicates a general decrease in the price level.
If the price of a £1 bag of flour increases by 5p, that means flour inflation is 5%. This concept also applies to services, such as getting a haircut.
You might not detect minor increases in inflation from one month to the next, but over time, these rising prices can significantly affect your purchasing power.
Increased inflation is a factor that could encourage certain savers to consider investing, as the gains from investing in the stock market have historically been more inclined to keep pace with rising prices compared to the returns from keeping money in cash savings.
Find out more here.
If this isn't making sense, Sprawling explains it. Inflation is currently at 3.8%, meaning £10,000 kept in a no-interest current account might lose approximately £380 in actual value within a year.
"The hidden price of doing nothing is significant. If your money isn't generating at least the inflation rate, it's essentially losing value. Moving to accounts that provide better returns is essential for maintaining your buying capacity," he states.
I advise depositors to look for the most favorable interest rate that suits your situation, while also considering your requirements.
If you're looking for an account that allows you to access your money in minutes, rather than days, conduct your research and review the Terms and Conditions of various accounts; not every "easy access" option is as straightforward as it may seem.
If you don't wish your funds to be tied up in asavingsAn account that comes with many conditions regarding withdrawal frequency, don't be concerned, as there are numerous savings accounts that allow you to withdraw and deposit as frequently as desired – you just need to do some comparison to discover the most suitable one for you.
Regarding your current account, Derek suggests performing a weekly assessment of the funds available.
Budgeting on a weekly basis is effective for many individuals — it allows them to stay in control and avoid spending too much," he states. "Refilling your checking account according to your spending patterns ensures you're not keeping significant amounts vulnerable to inflation.
The essential approach is to be deliberate: understand your requirements, maintain that sum available, and transfer the remaining funds to an account that incentivizes saving.
In this manner, your current account functions basically as a digital wallet – rather than a financial drain that loses value over time.
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