Brits are being urged to take action as soon as possible with their savings, as Tesco Bank has said that many are currently losing money, and the Bank of England could make cuts to interest rates
A high-street bank has sent out a stark warning to its three million customers, advising that inaction is costing them money as inflation looms large. On the cusp of the UK’s latest inflation figures release on Wednesday, Tesco Bank has raised the alarm after discovering that 39% of Britons do not understand how inflation affects their savings.
The financial institution flagged particular concerns for younger savers, stating nearly half of those aged between 20 and 40 (49%) are unclear about the effect of inflation on their savings, potentially missing chances to protect their nest eggs and get more bang for their buck.
With the Bank of England on the brink of unveiling fresh inflation data on Wednesday July 16, Tesco Bank warns this could spell trouble for those stashing cash in savings accounts.
Tesco Bank noted the critical nature of inflation rates to consumers, pointing out it signifies the rise in goods prices and how it can diminish the purchasing power of consumers – and mean the savings are worth a lot less.
Among the many who fail to grasp inflation’s implications, the survey by Tesco Bank uncovered that 11% mistakenly believe inflation boosts savings values, whilst 7% erroneously think it has no effect. Furthermore, one in five (20%) confessed they’re simply clueless about the meaning of inflation.
Tesco Bank’s Save and Pay Director, Chris Henderson said: “Given the cost of living, it’s concerning that so many people are in the dark on inflation and the impact it has on their money.
“Knowing what inflation does to your money, and how you can protect your savings when the inflation rate is higher, is an important part of managing personal finances. When the rate of inflation is on the rise, it means the costs of things in our everyday lives are going up more quickly, so the money we have in the bank doesn’t stretch as far. As an example, if inflation remains at 3.5% for the next 12 months, the £100 you have in the bank today would buy you £96.62 worth of goods in a year’s time.
“The truth is that inflation is different for everyone depending on what you buy, or pay for, each month but being aware of the UK’s inflation rate is important. While there is no fail-safe way to protect your money from inflation, making sure you are getting a competitive interest rate on your savings can certainly help.”
Meanwhile, Bank of England Governor Andrew Bailey has indicated that interest rates could be cut if the job market slows down. The governor also mentioned to The Times that businesses are “adjusting employment” following Chancellor Rachel Reeves’ decision to increase national insurance contributions (NICs) for employers.
Companies are “also having pay rises that are possibly less than they would have been if the NICs change hadn’t happened”, Mr Bailey commented. In his interview with the newspaper, he observed that the British economy is lagging behind its potential growth.
Mr Bailey has expressed his belief that the base rate, which the Bank of England opted to hold in June, is on a trajectory to be reduced. The prevailing Bank rate of 4.25% impacts all borrowing within the UK, from mortgages to personal loans, and it’s set for reassessment on August 7 by the Bank’s Monetary Policy Committee.
“I really do believe the path is downward,” Mr Bailey said in an interview with The Times. He further added: “But we continue to use the words ‘gradual and careful’ because… some people say to me ‘why are you cutting when inflation’s above target?'”