How can you get an interest rate that keeps up with inflation?
When the economy is in a downturn, it can be hard to get good interest rates for your savings. Inflation is often low – but so are interest rates – making it hard but not impossible to stay ahead of inflation. Here are a few options you should look into:
- fixed rate savings account – also called fixed term deposits or fixed rate savings bonds, these accounts lock your money away, usually for 1 to 5 years. In exchange, you get a higher rate of interest than a typical savings account, set for the length of the term
- cash ISA – these are a great option if you’re looking to minimise the tax you pay. Any interest you earn on your ISA is tax-free. You can only pay in up to your ISA limit each year – a maximum of £20,000 in 2018/19
- fixed rate ISA – combining the tax benefits of an ISA with the features of a fixed rate savings account, fixed rate ISAs lock your money away for a set term and generally offer a better rate of interest than a cash ISA
- lifetime ISA a special type of ISA designed to help you save for retirement or to buy your first home (you can’t compare this type of ISA with us). You can pay in up to £4,000 a year, and the Government will add an extra 25% – so you get up to £1,000 of free money. The downside is that you can only take the money when you buy your first home or when you retire at 60+, otherwise you lose all your bonuses
But remember, if you get an offer out of the blue via a call, email, post or word of mouth that sounds too good to be true in terms of potential inflation-beating returns, it could be a scam, so be very wary.