Updated: Dec 8, 2020
Disclaimer: this post includes promotional offers as part of a paid partnership with Chip, for every person who is referred to join Chip+1 using the links and code below, Millennial Saves will receive a small fee. These fees are fed back into my website and social media to bring you bigger and better content.. and exciting things in the new year! Thank you.
2020 has been a /year/ and if you're like me, you're looking forward to 2021 being the year you smash your goals out of the park! I am setting myself a goal of saving £10,000 in 2021 (you can read how I intend to do this here) - only half of which I can save from my wage, so it's important that I understand how to make my savings work for my specific goals. One of the easiest ways to do this, is ensure you're getting the best interest rate or return on your savings as possible. I don't intend to buy property until 2023, so I need to make sure that my savings are worth the same then as they do now.
Now if that sounds like crazy talk, because £10,000 is £10,000.. hold up. Let me tell you about buying power, and how actually, your savings are loosing value.
Inflation and Buying Power
Interest rates are set by the Bank of England, and are generally created alongside the rate of inflation (how the price of things change over time). It's important to have your money in a savings account offering an interest rate above the current rate of inflation, otherwise you are loosing value.
As the rate of inflation goes up, the £100 you put away in 2000 is worth less in 2020 because the things you want to spend that £100 on, now cost £169.59 (based on a average rate of 2.8% per year) Let's try a more relatable example.... in 2000 a Freddo cost us 10p, but in 2020 that same product, costs us 25p, and if our money isn't matching the increase in value of the products around us, we're loosing value. Your buying power has weakened because your savings are not worth the same value as they did originally.
How has Covid-19 affected our savings?
The Bank of England first cut the base rate from 0.75% to 0.25% on 11 March, only then to reduce it again to 0.1% on 19 March, pushing it to its lowest level in history. Following this reduction, a lot of banks started to reduce their interest rates on savings accounts to match, at 0.1%. A study by The Bank of England and NMG Consulting conducted between 25 August and 15 September found that household savings had actually increased this year, and 70% of those who had added to their savings this year, intended to hold their savings in bank accounts. So now there are even more savers than before, but almost no opportunities for our savings to grow.
That does sound a bit doom and gloom so I've put together a selection of the best savings accounts in the UK right now.. have a think about whether any of these can work for your savings goals!
Best savings accounts of December 2020
A total of 40 million people in the UK have easy access savings accounts, but only 10% of them - primarily pensioners with large life savings pots - move them around to different accounts to make the most of the best interest rates on the market [BBC]. Yes, it can be a pain, but to make your money really work for you and for your goals, you need to take advantage of banks offering higher interest rates.
I've used a number of comparison websites to make this list. For Easy Access Savings Accounts I have chosen to include ones which allow unlimited withdrawals as I believe these to be the most convenient for Emergency Funds. I've also included Regular Savers which you may find useful if trying to build savings, Lifetime ISAs for those looking to save for their first home or retirement and Fixed Rate Accounts for those looking to save for the long term.
Hands up who spotted Chip+1 at the top of my list for Easy Access Savings Accounts? 🙋♀️
Chip is a better way to build and grow your savings. Their app brings you the best returns on
savings (1.25% variable) and saves up money for you automatically.
As a reader of Millennial Saves, you can get access to Chip+1 by clicking here and using the VIP code: MSAVES20
How they grow your savings
Chip offers the market’s best return on FSCS eligible savings, that you unlock by
referring a friend (or by entering the VIP code MSAVES20). They pay this from their marketing budget, as they'd rather give this money directly to customers than pay advertisers.
They also pool our savers money and negotiate better interest rates for them. So rather than
you needing to search for the best savings rates, we bring them to you. And enable you to
open these accounts in the Chip app.
They also negotiate directly with private banks, to deliver access to exclusive savings
accounts that traditionally have huge minimum deposits. This was the kind of service that
previously through wealth managers for the super wealthy, but they're making it available to
How we build your savings
Chip have built a powerful AI that uses Open Banking data to analyse your spending and
automatically save the perfect amount of money for you every few days - big enough to build
serious savings, small enough that you won’t feel it. They also offer several tools to encourage and motivate you to save up money. Using the same little psychological tricks that most companies use to get you to spend more, but Chip are getting you to save more for yourself.
The average Chip saver puts aside £1,800 a year.