How To Beat Low Interest Rates

Recently, I shared with you how I review my portfolio. I’ve been saving regularly for the past ten years and have been more than frustrated by the low rates that we’ve been stuck with since 2009. Mark Carney also announced that the Bank of England base rate will stay low and not be raised until the rate of unemployment drops. Most are predicting that we’re stuck with this lousy rate for another three years. For those with a mortgage this is good news but, for savers, it’s a very different story.

Now more than ever it’s important that you review your portfolio regularly and stay active in moving your funds around when it isn’t achieving your target return. I always spot two or three accounts which are earning less than inflation. In some cases, this is deliberate as I need to keep some money for emergencies in an instant-access savings account which are usually paying sub par rates. For the money which isn’t working hard in similar savings accounts here’s what I do…

Look at Money Saving Expert

Money Saving Expert is by far one of the top visited sites for personal finance and savings advice in the UK. Handily, this site does all the heavy lifting when it comes to finding the top-paying accounts. They mostly provide advice on accounts that you can open with banks and building societies but more recently they have discussed peer-to-peer lending platforms including Zopa and Funding Circle.

Consider Alternative Investments

Many may groan at the thought of doing something other than saving with a bank or building society but unfortunately there really is little yield when an investment is completely risk-free. If you’re not sure of what kind of return you want then you need to take a step back and consider:

When do I need the money?
Am I willing to lose most or all of my investment for a potentially high return?

If you can’t answer, either of these questions then it may be because you haven’t set a goal and therefore don’t know what you’re saving for. Do this first before reading any further.

Alternative investments include:

Talk to Others

****This may be tough as it may not be immediately clear if there’s anyone you know who you can discuss this with. If you already have someone on the same wavelength as you when it comes to money then they’ve most likely already made themselves known to you. Approach them to begin with. If you have no one else, consider finding like-minded individuals via social events.

My Portfolio Split

Where do I put my money to beat low interest rates? Here’s my breakdown of investments (Note that these percentages do not show the return but rather my allocation towards this investment from my total portfolio):

Stocks and Shares ISA = 13.72%
Retirement Index Funds = 32.70%
Regular and instant-access savings accounts = 14.82%
Special current account that accrues 5% = 5.8%
Cash ISA = 13.36%
Funding Circle = 9.54%
Zopa = 4.94%
Community energy = 3.48%

If you have other ideas for how to beat interest rates, share these in the comments.

All information provided at Life-Life Balance is for informational purposes only. MM is not a qualified financial advisor. Before making any decisions on your finances you should seek advice from a qualified advisor.

*Image courtesy of Stuart Miles at Free Digital Photos.