As global economies seek to ride out the storm that is 2020, all eyes are on the UK and it’s handling of the current crisis and how it will support its people through one of the worst recessions the country has ever experienced.
From mid-March until August, a national lockdown stopped people from commuting with the ripple effect being that consumers have completely changed their shopping habits (and it looks like these new trends are here to stay). Alongside this, the hospitality sector was hit hard, with many restaurants, pubs and bars unable to function and forcing businesses to furlough their staff.
In August, there was a glimmer of hope when UK Chancellor, Rishi Sunak put in place the ‘Eat out to Help Out’ scheme to help boost a burgeoning economy, but with rumours of a potential new ‘circuit breaker’ lockdown and regions in the UK put into various states of limbo through tiered lockdowns, economic recovery will continue to be slow and unpredictable.
Much of this optimism has dissipated since the advent of the second wave of the virus and announcement of a second, although less severe, lockdown.
However, the current economic situation is not all bleak for individuals who are fortunate enough to be in a stable financial situation.
Studies show that those who were able to save were able to do so much more effectively throughout 2020 versus any other year. Over £66 billion was saved by UK consumers as people cut their commute completely, and did not go out or venture abroad as frequently as they would have in previous years.
According to figures, around two in five people in the UK managed to save more during the lockdown. These figures could indicate that those who were already saving pre-lockdown are saving more now and that there is a new wave of savers joining the mix. In both cases, less sophisticated savers and investors are most likely keeping up with the tradition of placing their money in their main bank provider’s saving products.
What do I need to know about the current Bank of England (BoE) interest rate?
At the start of 2020, the Bank of England interest rate (also known as the base rate) was at 0.75% - it was stable, and at its highest point (since 2011) between August 2018 up until March 2020.
Just as the pandemic hit, the Bank of England has cut their rates twice, once to 0.25%, and now to 0.1%
So how does this rate cut affect savers?
Most high street banks are paying as little as 0.01% on a consumer’s savings - this means that if you were to save £10,000 in a year, you will only get a £1 interest on your cash. Furthermore, even challenger banks who were previously competitive with their saving product offerings have had to cut interest rates.
Why should I consider creating a financial plan?
Although rates seem dreary right now, that doesn’t mean there aren’t options for those who want to make more interest on their savings.
However, before we get into where you should think about putting your money, there are a few considerations to make.
First, there has never been a better time to go through your finances and create a financial plan to help you better understand where your money is going, where you can make cuts (if you want to save more) and how much you can save per month.
Next, you should consider your goals - how much can you save per month, how much do you want to save per month, what are you saving for, and is there a deadline (for a wedding in two years, to buy a new house in five years, a pot you can dip in and out of quickly in case something breaks in the flat, or is it continuous - a safety net in case of redundancy)? This will dictate the type of investment or saving product best suited to either your immediate or long-term needs.
Once you have figured this out, you need to weigh up your options. There is an overwhelming amount of information from providers who don’t seem to be very different from one another out there. At Akoni, we’re seeing a significant rise in demand for easy-to-use cash management platforms that can help consumers see all of their options based on their personal financial needs and their specific criteria. This can take away a lot of the hassle around applications, and doing research, and help consumers make better, more informed decisions on where they hold their cash.
So, whether you’re a savvy saver or a newcomer, these few points should remain front in mind when considering how to increase the value of your idle cash amid turbulent economic times, and in a hopefully brighter future.
About Akoni: Akoni is an award-winning UK cash platform, which provides a marketplace to SMEs and charities, as well as to individuals through our white label distribution partners including IFAs, wealth platforms, accountants and SME hubs. Akoni uses innovative technology to personalise cash planning solutions for clients, and also provides a full API solution to banks and insurance clients.