There’s no doubt about it; modern households are struggling to build any kind of short or long-term savings in the current climate.
This is particularly true for Millennials, with 53% of people aged between 22 and 29 claiming to have no savings at all at present.
In this post, we’ll consider the challenge that this poses while offering some actionable tips to help prevent the value of your savings from declining.
- Understand the Macroeconomic Climate and the Role of Banks
When determining the overall savings rate available to customers, the macroeconomic climate plays an extremely influential role. The same can be said for banks, who often react to the macroeconomic climate by altering the accounts and the savings rates that they offer to their customers.
This was evident recently, as while the Bank of England increased the base rate to 0.75% in August, few banks have factored this in to their variable savings account rates. Despite this, many were quick to apply the hike to their variable rate mortgage products, hitting savers with a double-whammy in the process.
Understanding this is crucial when looking to optimize the value of your savings, as it offers an insight to the challenges that you face as a customer. It will also force you to seek out the accounts with the best rates, helping you to make the most out of your earnings.
- Diversify your Investments
While it may not seem like it, placing your money in a basic savings account represents the most basic form of investment. After all, this passive vehicle applies interest to your savings and allows you to gradually build wealth, no matter how small the incremental returns may be.
In the current climate, however, it may make sense for you to diversify your interests and seek out more rewarding assets. You can access a managed range of stocks and shares through some ISA products, for example, while bonds and real estate may also offer value for those with a little more starting capital.
Just remember that these assets are fraught with risk, so it’s important to seek out independent advice from a service provider such as Hymans before making a decision. This will instantly minimize your risk while also optimizing your future returns.
- Focus on Earnings rather than Savings
If you find that your savings are being impacted by a low rate of interest, you may struggle to achieve your desired returns.
With this in mind, you may be better served by focusing on earnings in the near-term, as you look to create optimized income streams that provide an instant boost to your savings accounts.
This can be achieved through investment vehicles or the additional income streams provided by freelancing, depending on your unique circumstances and existing knowledge base.