How to optimise your savings while interest rates remain low

While the level of inflation in the UK fell to 0.9% in October, it remains disproportionately high in relation to interest rates. This is because the Bank of England (BoE) are continuing to support a base interest rate in order to support the economy, which is impacting everything from mortgage repayments to savings account returns.

In fact, savings rates among banks (and to a lesser extent, building societies) are falling to record lows in the UK. A decreasing number of these products are delivering returns that are higher than the prevailing rate of inflation, and this trend is to continue for the foreseeable future at least.

3 alternative savings vehicles for citizens 

With bank savings account rates declining, it is important that you adopt a proactive approach to your money and seek out more lucrative vehicles. Here are three viable examples:

  1. Prioritise building societies over banks

While the interest rate freeze has impact both banks and building societies, the former have been more seriously impacted. With some banks offering rates as low as 0.1%, for example, there are building society accounts that are maintaining returns in excess of 2%.

This is a huge difference, and one that reflects the core differences between banks and building societies. While the former are controlled by share holders and profit-orientated, for example, the latter are managed by the community and have less of a commercial focus. This makes it easier to maintain higher rates even as the interest rate falls.

  1. Consider low-risk investment options like dividends

While you may be loath to enter the financial marketplace, there are a number of low risk investment vehicles that are ideal for beginners. One of this is to commit your funds into a managed portfolio, which is selected by investment experts and tailored to suit your budget and prevailing risk appetite.

Dividend investment is also a viable option, as allows you to back blue-chip stocks that have maintained consistent and reliable growth over the course of a decade or longer. Companies such as Coca Cola fit this brief, while successful dividend investment can deliver modest but quarterly returns that quickly accumulate over time.

  1. Use spread betting to access higher risk derivatives

The financial market has evolved considerably in recent times, both in terms of the derivatives available and the sheer number of investment methods available. Take spread betting, for example, which is a simple and effective way of investing in high risk derivatives without forcing you to compromise your underlying philosophy.

shutterstock_283530872Available through online trading platforms such as ETX Capital, spread betting is a flexible vehicle that enables traders to speculate on the price movement of a specific stock, asset or derivative. You can back prices to both rise and fall, however, making it possible to earn short-term gains and profit in a depreciating marketplace.