“Frugality includes all the other virtues”
Cicero (106 BC – 43BC)
Over the last 10 years, it would be fair to say that savers have had it tough while borrowers and spenders have been given the spotlight.
Interest rates paid on cash deposits have declined steadily to the point where a hand down the back of the sofa would probably generate a higher return than most instant access accounts! Am I being facetious? Maybe a little...
Many high street banks and building societies have long taken advantage of customers’ unflinching loyalty and inertia when it comes to finding the best savings deal and after all, it is very difficult to change bank accounts - isn’t it? Wasn’t it?
The value of time
Back in July 2012, Ed Balls (the then Shadow Chancellor) told us:
The Andrew Marr Show Interview, July 8th 20121
“You’re more likely to be divorced than to change your bank account”. It’s been a popular phrase over the last two decades and one favoured more recently in 2014 by Andrea Leadsom, the economic secretary to the Treasury in an interview with the Financial Times2. Are we really so unhappy that on one side of the coin we’re divorced while on the other, we let profit-hungry high street financial institutions have us locked in shackles? Not according to the latest figures.
In 2012 and 2013 combined, there were 232,860 divorces across England and Wales3. In late 2013, the Current Account Switch Service (CASS) was launched and over the course of the next two years (2014 – 2015), it was used more than two million times across the UK (2,190,777)4..
That’s a fair difference and assuming there weren’t around 1.95 million divorces across Scotland and Northern Ireland in 2012 and 2013, it’s safe to say we’ve moved on. In fact according to official BACS Facts and Figures, CASS has not been used less than 69,658 times in any full month since launch up until April 2016. Perhaps a pertinent buzz-phrase for the future could be, “You’re more likely to switch your bank account than get married.”
But the banking problem still exists. Why do so many of us make do with a cash account service that doesn’t make our cash work as hard as it could? Furthermore in the middle of all this is one important question to ask: ‘How much should I actually hold in cash?’ Alas, like many of life’s key questions the answer is not straight forward.
Making your cash work for you
You should hold cash sufficient to cover any unexpected bills; the boiler imploding on the coldest night of the year, or that strange noise the car’s been making suddenly becoming (via a sharp inhalation from the mechanic) more…much more - than a strange noise.
One should also hold enough to cover planned expenditure. It’s a rather obvious point to make I know, but hear me out. If you plan on buying a new car or taking that dream holiday in the next 18 months, you should really have these funds held in cash rather than invested in the markets, because short-term markets can be volatile. We are reminded of this fact in the Courtiers analysis of the latest Barclays Equity Gilt Study.
Finally and perhaps most importantly, the amount of cash you hold should be an amount you are comfortable with. Make it more than enough though, and you could be missing out on some valuable investment opportunities.
Allow me to pass on a few insights gained over the years, which can help you get the most out of your cash savings.
Do not underestimate the power of the current account
Courtiers regularly researches and identifies the most suitable account options to help others maximise their cash savings returns based on ambitions, access requirements and FSCS coverage. This is part of a Cash Management Service and means keeping a keen eye on the market. While we often see new offers and deals arise, and they do appear attractive, they are usually designed to lock individuals and families into a much broader range of services.
Sometimes it pays to talk, especially where balance is concerned. To see if you can take advantage of the Courtiers Cash Management Service, speak to your Adviser.
- Transcript of Andrew Marr Show, Interview with Ed Balls, MP Shadow Chancellor July 8th 2012
- Tories eye making banks switch accounts instantly, FT Article, June 17th 2014
- ONS Divorce Statistics for 2012 / 2013 in England and Wales, latest release, November 23rd 2015
- BACS Facts and Figures, various statistics about the Current Account Switch Service
- Payment shock: bank customers could get zapped for overspending, Guardian Article May 19th 2016
World’s first Internet of Things bank helps you take control of your finances and kerb overspending Intelligent Environments Press Release, 19th May 2016
- The Icesave Issue, Factsheet issued by Ministry for Foreign Affairs of Iceland, June 2010
Did people who put money into Icesave get it back? Article from The Telegraph, September 19th 20
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