When you’re getting poor annual returns, you’d be forgiven for thinking that it’s just not worth putting money aside. You might as well spend it while you have it! But there are good reasons this isn’t the case.

1. Are you saving or investing?

Quite often, when people talk about “saving” for the future, they really mean investing. In other words, putting money in an investment that they won’t touch for at least 10 years, probably not until they’ve retired.

For this kind of “saving”, you shouldn’t be putting your money in savings accounts anyway. You should be putting it in better-performing, slightly riskier products such as pensions and the stock market—and, as a result, you can ignore current interest rates.

Keep putting money into pensions and the rest, because these are long-term and you will need the money when you retire.

Read more: Which investment opportunities should I avoid?

 

2. There are usually good savings rates around if you do some digging

It might be worth investigating current rather than savings accounts, or cashing in on introductory interest-rate offers then changing accounts after a year.

 

3. There are alternatives

Look at peer-to-peer lending, where you can choose the interest rate you get on your “lending” (ie, saving).

Online schemes may want you to tie your money up for at least 6 months, but you could get a far better rate than on the high street.

Read more: Is peer-to-peer lending the smarter alternative?

 

4. Look to the future

When saving returns are poor, many savers complain that they’ve been penalised, while those who haven’t bothered to put money away have been looked after by the state. This won’t continue for long.

For a start, government funds aren’t limitless. Also, around 2025 (or earlier), the Asian economies will be taking over the world. They certainly don’t hold with state support for any but the most desperately poor—and will be setting the bar for the rest of the world when it comes to social and economic behaviour.

 

5. It’s always important to have a savings safety net

Most of us couldn’t cope for more than a month if we suddenly weren’t earning. So even if you feel you’re losing money compared with inflation, having a savings account with enough to cover you for 6 months (that’s the ideal) is still worth it. You need to have that “self-insurance” in case the worst happens.

 

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