Real returns on savings at their lowest since the 1970s as inflation surpasses 10%

Kevin Brown saving specialist at Scottish Friendly comments on today’s inflation update from the ONS: 

Ever since the global financial crisis, individuals have been accustomed to receiving relatively low rates of interest on their savings.

But by eroding the real value of money, soaring inflation has severely reduced savings’ returns in recent months. Together with the Centre for Economics & Business Research we estimate that the real annual return on savings plummeted to an almost 50-year low of -8.5% in June. The last time it was lower than this was in February 1976 when it reached -9.5%.

Although spiraling living costs mean that millions of families don’t have the same ability to save or invest as they did a couple of years ago, this isn’t the case for everyone, with some UK households still lucky enough to have some disposable income to contribute towards some form of financial security.

The question individuals may ask themselves however, is what is the best approach when looking at ways to make their hard-earned money work harder? Now more than ever, having an emergency fund or rainy-day fund to fall back on can be of real value. If people have enough to put towards longer term goals such as a house deposit or retirement, then looking beyond cash accounts and thinking about the best ways to harness the potential for growth through investments may be a more feasible option to consider.