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Why Save Money In The Bank


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I have a fair bit of cash currently in my instant access savings account (not an ISA), it pays an interest rate of 0.75% which is really poor. I have therefore been looking at changing savings accounts. There seems to be two schools of thought on this :

1. Lock your money away for a fixed period, no extra deposits, no withdrawls until the end of the term and in return you will get around 4 - 5%.

2. Put your money in an instant access account and get a really poor interest rate.

So why save money in a bank, why not just keep it in your current account and use it when you need it. I am not of the mind to locking my money away until 2013 like some banks want, so I can get 4 or 5%. No thanks.

Has anyone else notice that saving accounts have essentially become bonds.

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I have a fair bit of cash currently in my instant access savings account (not an ISA), it pays an interest rate of 0.75% which is really poor. I have therefore been looking at changing savings accounts. There seems to be two schools of thought on this :

1. Lock your money away for a fixed period, no extra deposits, no withdrawls until the end of the term and in return you will get around 4 - 5%.

2. Put your money in an instant access account and get a really poor interest rate.

So why save money in a bank, why not just keep it in your current account and use it when you need it. I am not of the mind to locking my money away until 2013 like some banks want, so I can get 4 or 5%. No thanks.

Has anyone else notice that saving accounts have essentially become bonds.

Someone with a financial background might be able to explain it better but deposits and cheque accounts are treated differently in terms of what reserves the bank needs to hold. The bank is able to multiply its lending by a higher factor on money held in cheque accounts.

I too have a fair amount in a cheque account looking for a better home and it must be making the banks a great deal of money to be able to pay out no or virtually no interest and then lend the money out many times over at 6 or 7%.

While this is going on the best thing to do with the money might be to buy bank shares but we may have missed the boat

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For all of us who have put our deposits in the banking system, all we have really achieved is to allow the bank to leverage our money to lend to people on 6x salary mortages and continued the rise of house prices to further price ourselves out of the market.

:(

And dont forget, our prudence also means we are on record as having been sensible with our money and therefore cant claim benefits.

Edited by Johnny Storm
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Someone with a financial background might be able to explain it better but deposits and cheque accounts are treated differently in terms of what reserves the bank needs to hold. The bank is able to multiply its lending by a higher factor on money held in cheque accounts.

I too have a fair amount in a cheque account looking for a better home and it must be making the banks a great deal of money to be able to pay out no or virtually no interest and then lend the money out many times over at 6 or 7%.

While this is going on the best thing to do with the money might be to buy bank shares but we may have missed the boat

These days you can get you own back by lending to the bank, not only forcibly as a tax payer or a current account holder, or derisorily as a depositor, but voluntarily as an investor.

Look at ticker RB53 (5.3%pa RBS Bond).

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Surely the point of saving is (1) to gain compound interest and (2) to keep the value ahead of inflation. As such, you can get 4% currently, which is above inflation. You can therefore preserve the spending power of your money, and have some security. You do not get that in a current account. You can argue that inflation figures are fixed, but IMO it is the size of the savings rate above inflation that matters, not what the actual rate is. 4% might sound crap, but if inflation is 2% then it preserves value (in that same currency) and actually increases it even after tax. If inflation was 10% and interest rates 12% you might feel happier getting more interest, but you'll actually be no better off.

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Surely the point of saving is (1) to gain compound interest and (2) to keep the value ahead of inflation. As such, you can get 4% currently, which is above inflation. You can therefore preserve the spending power of your money, and have some security. You do not get that in a current account. You can argue that inflation figures are fixed, but IMO it is the size of the savings rate above inflation that matters, not what the actual rate is. 4% might sound crap, but if inflation is 2% then it preserves value (in that same currency) and actually increases it even after tax. If inflation was 10% and interest rates 12% you might feel happier getting more interest, but you'll actually be no better off.

But the real rate of inflation is at least 10%. :huh:

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But the real rate of inflation is at least 10%. :huh:

Probably near the mark.

But doing as mikthe20 suggests is a sight better than doing nothing. 3% on a one year fix involving a large sum of money is a couple of thousand added to the savings next year. It all helps in thin times for savers.

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There's a security issue to think of as well though, if you have all your money in your current account and someone gets your details or card then they can take more of it than if you have it in a savings account to which you do not carry the details on your person at all times.

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For all of us who have put our deposits in the banking system, all we have really achieved is to allow the bank to leverage our money to lend to people on 6x salary mortages and continued the rise of house prices to further price ourselves out of the market.

:(

And dont forget, our prudence also means we are on record as having been sensible with our money and therefore cant claim benefits.

yep, whilst others bought silver & gold. ;)

a good store of value, at the moment a good investment & 100% safe, guaranteed. B)

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For all of us who have put our deposits in the banking system, all we have really achieved is to allow the bank to leverage our money to lend to people on 6x salary mortages and continued the rise of house prices to further price ourselves out of the market.

:(

And dont forget, our prudence also means we are on record as having been sensible with our money and therefore cant claim benefits.

I NOMINATE THIS POST TO BE THE POST OF 2009. MODS PLEASE PIN THIS VERY CONCISE STATEMENT BY "JOHNNY STORM".

Johnny Storm has summed up in a couple of sentence, exactly what I have been feeling for years now, but in just two lines of text. Top Post !!!

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For all of us who have put our deposits in the banking system, all we have really achieved is to allow the bank to leverage our money to lend to people on 6x salary mortages...

yeah, but those magnificent risk takers, those giants of capitalism, are the ones who are really driving this economy forwards. aren't they?

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For all of us who have put our deposits in the banking system, all we have really achieved is to allow the bank to leverage our money to lend to people on 6x salary mortages and continued the rise of house prices to further price ourselves out of the market.

:(

And dont forget, our prudence also means we are on record as having been sensible with our money and therefore cant claim benefits.

I have not invested/saved in the government controlled banks for this reason.

We can therefore restrict ourselves to saving with the few remaining mutuals which are not permitted to lend out on such reckless terms but will still ultimately support house prices or buy shares in brewers, cigarette and processed food manufacturers who will use our cash to kill off as many people as possible and thus reduce the demand for housing. Arms manufacturers are a tricky one. While they do sterling work reducing the world population it tends to be in other countries and increases migration to the UK.

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I have a fair bit of cash currently in my instant access savings account (not an ISA), it pays an interest rate of 0.75% which is really poor. I have therefore been looking at changing savings accounts. There seems to be two schools of thought on this :

1. Lock your money away for a fixed period, no extra deposits, no withdrawls until the end of the term and in return you will get around 4 - 5%.

2. Put your money in an instant access account and get a really poor interest rate.

So why save money in a bank, why not just keep it in your current account and use it when you need it. I am not of the mind to locking my money away until 2013 like some banks want, so I can get 4 or 5%. No thanks.

Has anyone else notice that saving accounts have essentially become bonds.

Couldn't you buy gold? I hear gold's a good investment.....

[Let's get this thread off the main forum]

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  • 442 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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