Interest rates are at the lowest they have been for many years and it it looks like they are going to stay at these rock bottom levels for many years to come. Although this may be good news for people taking on debt like mortgages, savers have been the most hard hit by the current low interest rate levels.
In this article, we look at ways in which you can get a higher rate on your savings.
1) Use Peer-to-Peer Websites – The places that are currently paying the highest rate of interest at the moment are Peer-to Peer lending Websites. These crowd-funding websites are where you along with many other savers pool your money together in order to fund a loan for a perspective borrower. You can currently earn rates of between 6% – 10% with these websites. I recently wrote an article reviewing the various peer-to-peer lenders and you can find the article here . Have a look at this article to find the various websites you can lend your money on and the rates these websites pay.
The only problem with Peer-to-Peer lending is that these websites are not covered by the Financial Services Compensation Scheme(FSCS) and thus there is no protection of money invested. As a rule of thumb, don’t invest more than 10% of your savings in these non-regulated types of lending
2) Invest your money – Whilst you’ll be lucky to get a savings account that pays 3% interest, investing your money on the stock market can be a better idea as over the past 5 years, returns have on average been about 10% in the U.K. and between 15%-20% in the U.S.
Don’t know where to start or how to ‘play’ the stock market, no problem. Nutmeg is an easy to use investments platform that will help analyse your risk level and invest your money for you. Here is a review of nutmeg I wrote to see how easy the process is and how simple the platform is to use.
3) Change your Savings Provider – It is amazing how many people hold their savings with a specific bank out of convenience (maybe because they have a current account with that bank). If you are one of these people, it will come as no surprise that you are not getting the best rate on your savings. One easy way to check what the best rates are is to do a quick online search. Money Supermarket is a good place to start if you want to quickly compare what saving accounts are best for you.
4) Savings Bonds – I bond – These bonds have pay-out rates linked to changes in inflation as measured by the Consumer Price Index. At the moment, inflation is 1.3%. I know what you are thinking, these rates are too low and there is talk of the inflation level further reducing and possible deflation in the coming months. I think that inflation level will continue to be low until the middle of 2015 and will pick up after that. The Bank of England has an inflation target of 2% and thus I believe that the rate will settle just above this in the middle of next year, hence these I bonds will offer a better rate compared to most savings account. (This just shows you how low the returns on savings are at the moment for me to talk about I-bonds.)
5) NS&I premium bonds – A good way to save your money at the moment is to put it into premium bonds offered by National Savings and Investments . Although these bonds don’t pay any interest, the bonds you buy go into a monthly draw where bond holders get the chance to win cash prizes. The top prize at the moment is £1,000,000 and there are numerous other cash amounts that can be won every month. With the current low interest rate and low inflation, buying NS&I bonds could prove to be a good bet as you are foregoing minimal amounts of interest in order to try and get a huge windfall. And the best part of it is that all winnings are tax free!
I hope this article has helped you identify more potential avenues you can use to help your savings grow that little bit quicker. If you have some alternative suggestions or comments, please feel free to write your thoughts in the section below.