The cost of living is sky rocketing. Everything from petrol prices to the weekly food shop is on the rise, with a headline inflation rate of 7% according to the BBC. We all know times are tough, which is why knowing your options is key when it comes to having a savings account and managing your finances.
To help you understand what’s available to you, managing director of savings at Hodge, Katie Johnson, answers a few of your financial and savings account questions.
Take steps to be more energy efficient. Simple things like unplugging chargers, switching to energy efficient light bulbs, smart meters… question whether you’ll be using the hot tub as much as you did through lockdown!
There are also government schemes available to help people make ends meet. For example, those in Council Tax band A-D in England, Wales and Scotland may be eligible for the Council Tax rebate of £150 this month. Keep an eye out for other schemes you might be eligible for by visiting your local government website.
Savers have had a tough time over the past decades with savings interest rates at historic lows. But, recent increases in base rates have provided savers with a lifeline. There are many savings account rates and options out there, and which type of savings account you choose will be entirely down to your personal circumstances and how much interest you're looking for.
You will be able to obtain a higher interest rate if you can afford to lock your money away for some time, for example, in a fixed rate bond or ISA, but if this is not possible then an easy access account might be better suited. This will allow you to access the cash if you were to need it at any point
Alternatively, a mix of the two might provide a good solution for some savers.
This will really depend on your circumstances. Unfortunately, given the environment, some may find it difficult to put that extra bit aside so it will be important to understand the steps to take to manage expenses and generate cost savings.
For those with the capacity to save, choosing a fixed term rather than easy access savings account may suit them. There are also some neat tools which allow you to round up purchases to ensure that you are saving a small proportion as you spend.
You might have heard the chatter about less than favourable interest rates for the average savings account, with the likes of Martin Lewis warning people that they shouldn’t stand for anything under 1.5%. This is where research comes in, so you can make sure you’re getting the best return on your money. If you choose to save with Hodge, you’ll find a competitive offering with rates in excess of 1.5% across a number of our Fixed Rate Bonds and Cash ISAs.
Take a look at our article ’10 things to consider when saving’ to see if you can make some small changes to help save those pennies. You may not be putting away as much as you planned, but you can still work toward those big moments every day.
When money is tight, it can seem like the only solution to take money out of your savings account. But, if we do this regularly, you may find that your savings stop growing altogether (or in fact, they’re vanishing!). Earmarking an emergency fund (which is separate to your savings) may be a good idea to cover unexpected bills. That might mean having two savings account; one for long term goals and one for day-to-day emergencies.
It would also be useful to revisit your personal budget and understand where you can be cutting expenditure to avoid dipping into savings along with the steps mentioned around energy efficiency.
Rising cost of living throughout retirement is a key challenge for retirees to face. Those thinking about how much they’ll need in retirement may find it useful to discuss things with a financial adviser to understand how the rising cost of living will impact their retirement plans.
It is, however, important not to panic and make long term decisions on the back of a knee jerk reaction. The Bank of England is working hard to confine the current situation to a short-term event and are hoping to control the rate of inflation over the coming months and years.
These are just a few suggestions, but there are lots of others out there. Check out Martin Lewis’ cost of living survival guide for example. The biggest takeaway is that you’re not alone in worrying about your finances right now, and if you’re not sure how to manage your money then you can speak to a financial advisor for some solid advice.