While interest rates a currently low is saving a form of slow motion bank robbery ? A government raid on peoples wealth, the people who are too afraid to expose their capital to the risk of stock market investment. At present – with inflation rates higher than the average deposit interest rates, the longer you save the less their worth.
Recent figures from the tax authorities in the UK show that more than 75% of the money going into tax free savings accounts (called ISAs) are going into deposit style savings accounts rather than investment accounts linked to the value of assets such as property, stocks or bonds.
Are people so frightened of money, and investment in general that they always prefer to take the safety first – the I don’t want to lose any money that deposit style accounts offer ?
Its the same within many pension schemes with pension savers opting to take the no risk approach the deposit style saving offers. Their fear of losing money prevents them from benefiting from the compounding of investment returns over time. Who on earth has advised them to invest their money for the long term in this way?
No wonder that the rich get richer, and the poor remain poor.
It leaves me scratching my head, that people who live here in the UK (which is one of the worlds leading financial centres) are either so frightened of investing, or oblivious to the advantages of investing.
Mark Carney the governor of the Bank Of England said today that 2.5% is going to be the new 5%.
Interest rates in the UK have traditionally averaged around 5% for over the last 100 years, but are currently 0.5% as the economy battles with the aftermath of the US Sub Prime scandals, and consequent melt downs.
If interest rates remain in the 0.5 to 2.5% bracket – things are not going to get better for savers anytime in the near future.
How much can you afford to leave on deposit – at the expense of missing out on much higher average stock market returns ??