"Risk-free tends to mean return-free, these days"by Andy Davis / January 21, 2016 / Leave a comment
Published in February 2016 issue of Prospect Magazine
We British are apparently among the world’s worst savers. According to the Organisation for Economic Co-operation and Development, the British household savings rate is one of the lowest of the countries the organisation tracks, far behind everyone in Europe except Greece, Denmark and Portugal and also well below the United States, supposedly the world’s “consumer of last resort.” Our own Office for National Statistics reported this year that the UK savings rate is now 4.9 per cent, back within a whisker of the low it reached just before the financial crisis.
That’s hardly surprising, considering that wages for most people have gone nowhere for years and the rewards you can expect for putting money on deposit are all but invisible. Why bother when you’ll be lucky to get 1.25 per cent interest? Arguably, it is official policy to persuade people not to save—spending and borrowing are the prescription to perk up our economy.
This is all well and good but sometimes saving is the only option. If, like us, you can see the time when children will need a chunk of money to help pay for university or training, the only approach is to save some cash.
But where? Today’s interest rates make saving a slog: more like running uphill than jogging down with a helpful wind at your back. Now that we are embarking on this exercise for ourselves, I’ve been thinking more about how to approach it and alongside a deposit account I plan to put some of the money into shares in a number of investment trusts that have started appearing on the stock market. These lend money via online peer-to-peer (P2P) platforms that are mainly based in the UK and the US and offer typical yields in the 6-8 per cent range.