BRITS are warned as £297B sits in dead-end bank accounts – and it’s costing you hundreds a year.
Brits are flushing away over £500 a year by leaving their cash rotting in low-interest “zombie” bank accounts, experts have warned.
Millions of Brits are being stung by a silent savings crisis[/caption]
New research reveals more than half of UK savers are hoarding their hard-earned cash in zero-interest current accounts[/caption]
A staggering £297billion is sat in current accounts that pay zero interest – meaning millions are missing out on easy money.
The research, by Opinium for Hargreaves Lansdown, found 56% of savers are parking their hard-earned money in accounts that give them absolutely nothing back – a 20% rise from last year.
And it’s younger savers who are feeling the pinch the most, with 67% of 18–34-year-olds admitting to stashing savings in current accounts – rather than moving it to proper savings pots.
Even higher-rate taxpayers (81%) and investors (83%) are falling into the trap.
So why are we doing it?
Almost half (46%) said they want quick access to their money for emergencies, while 15% said they couldn’t be bothered to move it, 14% preferred having everything in one place and 13% admitted they just hadn’t got around to switching.
But Sarah Coles, personal finance boss at Hargreaves Lansdown, says savers are “paying a big price for a misguided sense of comfort”.
She warns of two big dangers with the current account habit – the first being overspending.
“You don’t have to transfer cash from another account in order to spend it, you just spend as normal – and find yourself eating away at your savings,” she said.
One in five admitted they’ve burned through savings without even realising.
The second danger is inflation. Coles explains: “With inflation around 3.5%, a household holding £3,365 in a zero-interest account would lose £114 in spending power in just one year.”
Those sitting on £10,180 would lose £344 annually – and over five years, £3,365 could shrink by £532.
Coles says Brits could be earning 4.5% or more interest by switching to an online savings platform.
“These sites let you track everything in one place – and snap up the best rates without drowning in paperwork,” she added.
How do I find the best savings rates?
WITH your current savings rates in mind, don’t waste time looking at individual banking sites to compare rates – it’ll take you an eternity.
Research price comparison websites such as MoneyFactsCompare.co.uk and MoneySupermarket.
These will help you save you time and show you the best rates available.
They also let you tailor your searches to an account type that suits you.
As a benchmark, you’ll want to consider any account that currently pays more interest than the current level of inflation – 2%.
It’s always wise to have some money stashed inside an easy-access savings account to ensure you have quick access to cash to deal with any emergencies like a boiler repair, for example.
If you’re saving for a long-term goal, then consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates.
Moral of the story?
Ditch the dead accounts – and make your money work for you.
Time to ditch zombie savings accounts
You might want to keep money in a current account paying no interest because you need to use it for daily expenses.
But, if you’ve got cash stashed away in a savings account paying little to no interest, it pays to switch to a different one.
The latest data from Moneyfactscompare shows some savings accounts are paying as little as 0.49% interest on minimum £1 deposits.
However, there are a range of bank accounts offering rates over 5%, including across easy access savings accounts and Cash ISAs.
According to Moneyfactscompare, Chip’s Easy Access Saver is offering the highest rate across easy access savings accounts, then Atom Bank’s Instant Saver Reward – with rates of 4.76% and 4.75%, respectively.
Savers can also get rates of up to 5.71% on easy access Cash ISAs, according to the price comparison website.
Make sure you’re picking the best savings account for your needs though.
ISAs are a great way to save money as any interest earned is tax-free, which is not the case for easy access savings accounts.
A lot of savings accounts set a limit on the amount of withdrawals you can make per year before incurring a fee too.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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