Big squeeze leads to families’ cash freeze
It’s still cold outside – and many families are also feeling a chill on their finances.
The Office for National Statistics has reported that inflation jumped to a two-and-a-half-year high in December.
And, as stores pass on rising costs to shoppers, commentators have predicted the hike in living costs could get even steeper this year.
It has prompted concerns that some families may be tipped over the edge.
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, says: “For households in a precarious financial position, this new squeeze could tip many into problem debt.
“Rising costs in food, fuel and clothing will add to existing pressures and we can expect to see a higher level of arrears on everyday household bills.”
Savers may also find that their quest to find an account to even keep up with inflation gets tougher.
The eroding effect of inflation gnawing away at savings means cash is in danger of dwindling in value in real terms if it’s left sitting in accounts with interest rates that lag behind inflation.
Analysis of the savings market by Moneyfacts has found that only around one in every 15 deals currently available matches or beats inflation. The number of rates being chopped across the savings markets has been outweighing the number of rises for the last 15 months. So what can savers do? One option might be to keep an eye on the rates on offer from “challenger” banks.
Moneyfacts says some of these banks – such as RCI, Post Office Money, Ikano and Sainsbury’s – have been making improvements to their rates recently.
With interest rates staying low, any upward tweak in savings rates is likely to be small, although it could still make the difference between the real value of your savings pot growing or shrinking.
Some current accounts may also offer better rates than savings deals and some also offer cash to switch.