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Technology has changed the savings market, but should you change the way you manage your savings to keep up?

A look at the changing face of the savings market and how a savings portfolio could help you get better returns on your cash.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

At the turn of 1981, the year HL was founded, the Bank of England (BoE) interest rate was 14%.

At those levels, getting a good return on your cash savings would’ve been relatively easy. Even if, with inflation running at 13%, the value was eroding quickly.

But switching your savings to get a better deal would have involved visiting multiple banks to find the best deal and open accounts. Most likely in person. A lot has changed in the market since then.

Online banking started in the late 90s, allowing people to start managing their money through the internet. This started a behavioural shift, to the extent that some high street banks now see as much as 90% of transactions done digitally.

The route to digital allowed other online-only brands to enter the savings space.

Comparison sites also evolved, allowing people to compare different accounts and rates in one place. Then came open banking, enabling app-based banks to offer savings products from third parties, without providing products themselves.

But perhaps the best development has been the emergence of savings platforms. These allow you to pick savings products from different banks and building societies and manage them in one place too, typically online. This means you spend less time applying for products and don’t have to set up different sets of security information to stay on top of it all.

Is this changing the way you manage your cash?

The rise of digital channels has made it easier to compare, open and manage savings products so you can hopefully get a better return on your cash. But lots of people aren’t taking advantage and are potentially missing out on huge sums of interest.

So do you also need to consider the way you’re managing your cash savings?

Gone are the days when you leave your cash sat in a high street account and earn a good return. Since the BoE cut the interest rate last year, big banks have slashed their rates to the bone. Lots now pay as little as 0.01% AER/Gross* on their instant access accounts.

High levels of uncertainty over the past 18 months has accelerated the amount of cash flooding into easily accessible accounts. That’s despite rates falling to the floor at the same time. The average is now just 0.11%.

But much better rates are available in the market, and they might be higher than you think.

At the same time, the amount going into fixed terms is reducing. Fixed terms typically pay a better rate than easily accessible accounts, but you can’t normally withdraw your money until they end.

Don’t put all your eggs in one basket

Leaving all your money sat in low-interest accounts exposes it to the full force of inflation, meaning your money is losing value over time. So you should consider whether you need access to all your savings at once. Creating a portfolio of savings products could help you get a better return, while still having access to some of your money when you need it.

Having some money in an instant or easy access account is sensible to cover emergencies. We think you should have at least three to six months’ worth of expenses set aside to cover the unexpected if you’re working. If you're not working, or you're retired, we think you should hold one to three years’ worth. But you might not need all of your cash in these accounts.

Find out more about how much cash to hold

What could your savings portfolio look like?

A savings portfolio could be the answer to boosting your returns and limiting the impact of inflation. You get to choose a mix of easily accessible accounts and fixed terms to get a better overall rate, while still keeping quick access to some of your money. You can usually fix from just a few months, up to five years, although you won’t usually find this much choice with big high street banks.

You can use fixed terms to time your money to come back to you when you think you’ll need it. For example, if you’ve got a large bill coming up in just over six months time, a six-month fix will give you access to your money in time. And by locking it away, you’re less likely to confuse it with the rest of your cash.

Or you can be really savvy and choose lots of fixed terms of different lengths, so you have some money coming back to you at regular intervals.

Build your portfolio without the hassle

There’s no need to approach separate banks to get a wide selection of products. Active Savings can help. Pick and mix savings products from lots of banks and building societies in just a few clicks. Find a blend of products that’s right for you and manage everything together in one simple online account.

You can choose easy access products or fixed terms, ranging from just a few months up to five years, all in a few clicks. Products are added and withdrawn all the time, so see our website for the latest available.

High street banks offer instant access products which allow you to access your money immediately. Active Savings offers easy access products and withdrawals usually take one working day.

Find out more about active savings and get started in minutes

This article, like the Active Savings service, is not personal advice. If you’re unsure what’s right for you seek advice.

*AER (Annual Equivalent Rate) – AER shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products.

Gross – the interest rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.


Explore our Investment Times autumn 2021 edition for more articles like this.

See all articles

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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