Cash ISAs: Don't lose out to inflation
Updated: Mar 23, 2021
Low interest rates might be great news for borrowers but they can have a devastating effect on the long-term wealth of savers. Furthermore, when inflation runs in excess of interest rates, the buying power of your money will be eroded, even though the value of your capital might appear safe. Therefore, you need to keep a close eye on the amount of interest you are making on your hard-earned cash.
Nowhere is this more apparent than with cash Individual Savings Accounts (ISAs). Although interest rates on cash savings are generally low, there are numerous long-term fixed-rate cash ISAs that offer relatively attractive interest rates, so it’s worth shopping around to find the best deal. It is good practice to retain some cash in an easy-access deposit account to ensure you can cover unforeseen emergencies and short-term necessities, but there is no reason to tie up all your cash holdings in this type of account. Many ISA investors aim to leave their ISAs untouched for as long as possible in order to make the most of the benefits, and interest rates can be significantly higher for those who are willing to sacrifice some flexibility.
Life is hectic and it is all too easy to forget about your ISAs until the end of the tax year is looming. Rather than waiting until the eleventh hour, however, take the time to shop around now to find the best possible home for your money.
This article was written by Culverhouse Financial Planning Ltd.
The article outlines just some of the things you could consider in relation to Cash ISAs. It does not represent financial advice. If you would like personalised financial advice please contact a financial adviser.
Remember that the value of investments can fall as well as rise and past performance is not a guide to future performance.
Taxation is based on current legislation which is subject to change and will also depend on the individual circumstances of each investor.