Savings

It is believed that the world's first bank originated in Iran (then known as Persia) a couple of thousand years ago. Since then an entire multitude of banks have entered into our culture. Some have fallen by the wayside, not least during the world banking crisis of 2008 - 2009, others have been taken over by the governments within which they do their business, whilst some have continued to thrive for the benefit of their directors, their shareholders and, to a somewhat lesser extent, their investors.

As the credit crunch took hold the banks responded in a not altogether surprising manner. Savings rates upon which many people, including retirees, had come to rely upon to augment their meagre income from either state supported or private pension policies, were subjected to swingeing cuts. Investors who had been recovering reasonable rates of interest on their savings found that their banks had reduced the interest rates dramatically - sometimes to nothing at all. Those investors who had put their faith in the somewhat more risky investment market found that the value of their stocks plummeted, resulting in huge capital losses as well as the concomitant reduction in income. It is hardly surprising that the saving public (and remember, there are many, many more savers than borrowers from banks and other financial institutions) were up in arms. Not only was their prudence in accumulating a savings pot being unrewarded but also, those who had taken out a great deal of debt were benefiting considerably from the reduction in mortgage and loan interest rates.

The savers turned en masse to financial comparison sites and found that, if they searched carefully, there were ways of maximising their savings, so long as they were prepared to move their money around. The first and most obvious advice that the financial comparison sites and other financial advisors gave was to maximise any tax-free savings vehicle. The next and equally obvious piece of advice was to shop around. Different lending institutions were taking different approaches. Often, the relatively smaller institutions, with less of an exposure to sub-prime lending, were willing to add a point or two to the interest rate for savers. Sometimes this would be dependent on a commitment to invest for an extended period of time (anything from one to five years is common) but fixed rates could then be taken. Thus, the saver would be aware of exactly what their return would be over the term of the investment. High interest rates were also given for regular monthly savers, albeit with a fairly low ceiling on the savings fund. Somehow, most people (without the massive assistance that the financial institutions were given) managed to get through. When the banks begin to offer more tempting deals, as they surely will, the best advice is to maintain the same diffidence as if the crisis was still ongoing.

Don’t leap at the first savings account you see. Shop around and only reward the bank that deserves to have your money. It may also help to remember how your own bank treated you when times were tough.