A significant number of individuals are sitting on £5,000 in bank accounts, earning no interest - strategies for generating income from these funds instead.
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Hey there! Let's dive into the world of savings and find out why billions are gathering dust in current accounts with zero interest. According to recent estimates, an astounding £526 billion is just hanging out in these accounts, missing the chance to rake in £20 billion in interest annually. The culprit? A whopping 29 million people, and it's all because they're not shifting their cash to high-interest savings accounts.
Half of the folks keeping their hard-earned cash in current accounts are languishing without interest, but they have the opportunity to move their money to a higher interest savings account. One out of three people has a tidy £5,000 squirreled away in their checking accounts, with the average balance sitting at a not-so-impressive £2,067.
Enter Paragon Bank, who's shaking things up with a new savings app called Spring. This nifty app aims to help savers kick their apathy to the curb and generate better returns on their savings. But why are so many people content with leaving their money in current accounts?
Lackluster savings rates from the big banks play a part in the disinterest. Though the average easy-access account pays a decent 2.78%, the big five high street banks only offer an average of 1.25% interest on pure easy access accounts. Derek Sprawling from Paragon Bank contends that high street banks are offering little to no interest on savings while making it unnecessarily difficult to find better alternatives, leading to a rise in "current account coasters."
Apathy from savers is another issue that comes into play. It's a fundamental challenge when it comes to taking charge of savings and actively seeking the best account for them to grow as much as possible. One in ten people admit they keep money in their current account because they haven't bothered to move it to a higher paying savings account, while 11% claim there's no particular reason they haven't moved it to a high-interest savings account. Over a fifth of people say they are keeping money in their current accounts as a rainy-day fund.
If you were to keep £5,000 in the best easy-access account paying 4.76%, you could rake in £243 in interest. While the average current account balance of £2,067 would grow to £175.56 if kept in the best easy-access account.
Paragon Bank's app-based savings account called Spring offers an easy-access account paying 4.3%. Unlike Paragon Bank's flagship easy-access accounts which are managed by desktop and post, Spring's account can only be accessed through their app. This Younger audience is the targeted demographic. At 4.3%, the rate Spring offers is lower than the best easy-access accounts which pay upwards of 4.5%, but Spring's main advantage is that customers can move money from their current account to the easy-access account without any hassle using open banking technology, making it easier for savers to manage their money.
If you deposit £10,000 in Spring, you could earn £430 of interest over a 12-month period. Unlike some of the top accounts, withdrawals are unlimited, ensuring the rate remains the same regardless of how often you take money out. With some top accounts, frequent withdrawals can result in a lower interest rate, so watch out if you plan to access your savings frequently.
Spring's easy-access account is fully protected by the Financial Services Compensation Scheme, with the money being held with Paragon Bank, a licensed bank. It's important to note that if you're both a Spring and a Paragon customer, the FSCS limit of £85,000 applies across both accounts, not two separate £85,000 protections. Spring also offers 24/7 customer service with a UK-based customer service team to lend a helping hand if needed.
The question remains: why leave your money earning nothing in a current account, when you could be growing it in a high-interest savings account? So, go ahead - kick apathy to the curb and start saving smarter with Spring!
Fun Fact:
Did you know? In some countries, the concept of a checking account doesn't exist! Residents of Germany and Austria, for instance, rely on savings accounts (Girokonto) that offer higher interest rates, lessen fees, and perform the same functions as a checking account[5].
- With billions of pounds gathering dust in current accounts offering zero interest, many are missing out on gaining approximately £20 billion yearly by not navigating to high-interest savings accounts.
- The average savings account balance in the UK is not-so-impressive at £2,067, with one out of three people having £5,000 or more in their current accounts.
- lackee apathy towards savings could be a significant contributor to this issue, as one in ten people have funds in their current accounts because they haven't bothered to move them to higher-paying options, while 11% claim there's no particular reason for this decision.
- To assist savers in generating better returns on their savings, Paragon Bank's app-based savings account Spring offers an easy-access account paying 4.3%, with unlimited withdrawals and protections under the Financial Services Compensation Scheme.
- Ignoring the opportunity to grow savings in high-interest accounts can be unnecessarily harming one's personal-finance situation, and considering an alternative solution like Spring could prove crucial in achieving financial goals.
