There has been increased speculation over recent weeks that the Bank of England may initiate negative interest rates as part of its response to the Covid-19 pandemic.
It has been asking banks and lenders if they are ready for rates to go negative from their current 0.1% position. Should this come into force, it may mean you will receive a negative rate of return on the cash you hold at a bank or building society, effectively paying to keep it safe.
Research we’ve recently done revealed that over three-quarters of people are unwilling to pay banks to hold cash, with only a further 6% saying they already do so.
It is an issue that could be even more pronounced for those over 40, as they who hold 90% of the UK's savings. Our research showed 25% of them are putting more money aside than before the pandemic and 93% of their extra savings are sitting in cash.
Furthermore, 29% of over 40s hold all their savings in cash while 39% are more likely to hold cash now given all the uncertainty, with 26% saying lockdown has made them realise they need an emergency fund. Therefore, their exposure to falling interest rates is greater.
But with negative interest rates seeming to be a more realistic prospect, what can you do to make your savings work as hard as they can?
Not all hope is lost for savers - however you need to make sure you are fully considering the options, so your money isn’t impacted.
Interest rates are already at an all-time low with many savings accounts failing to keep up with inflation. This is not the time to be sticking money under the mattress. Instead, now is the time for people to consider their finances and how much cash they really must keep for short term needs and emergencies before it gets drained further.
Once you’ve worked out what needs to be held in cash, you should be making the rest of your money work for you and consider investments to do so. There are many different investment options out there for savers that consider how much access you want to your money, how long you want to invest it for, and your attitude to risk.
It can be daunting, but if you are nervous or need help, a financial adviser is a great option to make the most of your money. To speak with one of our advisers visit here.