There has been a lot of talk about the fact that savers are being poorly treated in the current financial climate. Interest rates have fallen to such an extent that those who have been cautious with their spending and have carefully saved all through their lives to provide for themselves in later life, now find themselves struggling thanks the low interest rates currently on offer.

This is not a new scenario. I remember, some years ago, commenting that for the first time in my experience interest rates on savings were actually higher than the inflation rate. For many years inflation had been higher than interest rates and though this was beneficial to house buyers, it was always bad for savers.

The repayments on mortgages would be devalued over the years and in the later years of the loan would have been devalued by inflation to such an extent that the payments were almost insignificant while the value of the property would have continued to rise, broadly in line with inflation.

It seems to be particularly irksome that the problems we are currently suffering have been brought on by excessive borrowing by governments, business and individuals. Those people who ‘did the right thing’ and saved to look after themselves are suffering so that those who did not can survive. It doesn’t seem right but that is the way of the world, like it or loath it.

In a financial climate where savings accounts offer tiny interest rates some may find it hard to support saving but it is important to recognise that with savings behind you, it is you that can make choices about your future. The alternative, where your life is funded by either loans or living hand to mouth, spending as soon as money comes in, leaves little room for flexibility.

Given the choice would you rather have some savings behind you, even though they pay little interest, or would you rather not have them.

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Filed under: Investments

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