How can you make your savings account work during uncertain economic times?
It may seem like a contradiction in terms, but a recession does not necessarily need to mean all doom and gloom for personal or business finances. When money is tight it may seem like the perfect time to cut costs just to make ends meet. Some people may neglect or be unable to put money aside into a savings account, but who knows what lies around the corner and when that rainy day fund will be needed?
Although interest rates on your business or personal savings account may not seem very high at the minute due to the increased risk with borrowers, there is still a way to make the most out of your money despite a recession. Certainly, if more of us continue to save and save, the economy will become a lot healthier than its current state.
When it comes to saving, the most popular high interest savings accounts are with a fixed rate isa or a flexible ISA. Although these may not be suitable for all savers, they can be a great way of getting a higher return on your money within a shorter period of time thanks to high interest savings rates.
As the bank is under the superposition that you will be keeping your money with them in a fixed rate account for a specified period of time, this is why you will be awarded a higher interest rate than you would get with, say, an easy access savings account. This is because in the event of having to withdraw money earlier than the set period specified within the fixed term agreement, banks are more inclined to think this will deter savers from withdrawing their money early. As a result, and to put it simply, the bank will have more money to play with and to lend to borrowers thanks to you and your savings.
Take note however that if you often use your savings as a back-up for buying office equipment, stationery or even groceries, this may not be the best option available. Although an easy access ISA may not give you that higher interest rate, it does give you the guarantee that if the printer packs in or an employee's laptop needs to be replaced at short notice, you will have the funds available to spend as you see fit.
Quite often, savings bonds are another popular way of investing money for a healthy return. Basically, the money is invested in various stocks and shares and these will increase in value when the market shares soar. Like most forms of investment, however, there will always be some element of risk involved and investing in bonds of this type is certainly not suitable for everyone. Just as the market can see the stocks and shares of its biggest companies go up in value, they can just as easily depreciate. This has been a regular feature of the global recession and for this reason may not be the best option for someone who cannot afford to take the risk of getting less capital back than what was originally invested. For a larger company, though, even if there was a fall in the market it is less likely to have a major impact on the day-to-day running and operation of the business.
Whether you are managing an office or running a home, having some savings set aside for life's little unexpected emergencies is always a worthwhile investment. From a business perspective, there should always be some fuel left in the tank, so to speak. If unexpected costs arise, there should be an emergency fund available to ensure employees can still come in and get on with their work. It also allows for future planning and strategic growth as the business can then keep up with the rest of the market and its competitors if there is some additional cash available. For the general householder, having a little pot of cash for a rainy day emergency may mean the difference between being able to get the car types replaced or having to rely on public transport for the rest of the month.
