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Leaving money as cash can be riskier than you think

Savers have had a torrid few months. Interest rates have been slashed to record lows of 0.1pc in a bid to stimulate the economy, leading to the worst time for savers since the financial crisis.

Back in January, the average easy-access Isa paid an already low 0.81pc. By the end of June that had more than halved to a paltry 0.37pc. That means your money won’t even keep pace with inflation and will be losing value with every moment it sits in your savings account.

This comes at a time when most of us have been able to save more than usual, as staying at home during lockdown forced us to cut out costly habits such as meals out, trips to the pub and commuting to work. The average Briton managed to put away a record 1,434 between April and June, according to the Centre for Economics and Business Research, a think tank.

So where are we to put our new-found nest egg when interest rates are at historic lows? One reader, David Stansfield, 78, wrote in to ask just that. One of our experts told the former sub-post master to put his 8,000 rainy day fund into income bonds from the Government-backed bank: National Savings and Investments. These pay a market-leading 1.15pc.

The other suggested investing the money instead, as stock market falls have created opportunities to buy in cheaply.

But there is another safe haven savers could consider: gold. The price of the precious metal reached a record high of $2,030 (1,550) per ounce this week. However some investors expect the price to jump by a further 25pc before the year is up, as people pile into gold in the hope it will protect them in the case of more market falls.

It’s a risky strategy, but people rarely consider the risks of leaving their money as cash. Selling out and moving your money into cash when markets bottom out could cause an investor with a 100,000 portfolio to lose out on more than 50,000 of returns over the long-term, calculations from our investment editor Taha Lokhandwala show.

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