If you haven’t saved any money yet this year, you’re most likely not alone. Savings rates across the UK have dropped dramatically in recent years, with the savings ratio – the amount of money people can save as a proportion of their disposable income – falling to its lowest level on record last year.
However, even though it’s mid-December already, it’s not too late to make a meaningful contribution to your savings in 2018 if you act quickly. Below, I look at three ways you could potentially boost your savings this year, including a trick that could turbo-charge your savings by a huge 25%.
Low-risk cash savings
If you don’t want to take any risks with your money, it makes sense to keep it in either a high-interest savings account, a cash ISA or a fixed-rate savings account.
If a high-interest savings account is your preference, your best bet right now is probably the Marcus account from Goldman Sachs, as this offers a market-leading interest rate of 1.5% (which includes a bonus rate of 0.15% for the first year). This is a flexible account that has no withdrawal restrictions or fees.
Alternatively, if you don’t mind locking your money away for a year, you could potentially pick up a higher rate. For example, Tesco Bank is currently offering a one-year fixed savings rate of 1.9% on deposits of between £2,000 and £5m for those willing to lock their money away for 12 months. This could be something to consider if you won’t need access to your money.
Peer-to-peer lending
If you’re looking for a better return than 1.5%-2%, and you’re happy to take on a little risk in pursuit of higher returns, it could be worth putting some money into peer-to-peer (P2P) lending, in my view. This is where you lend your money to businesses, or other people, through a platform such as Funding Circle. These days, it’s super easy to get started with P2P lending and it’s also very easy to lend money to a wide range of different borrowers in order to lower your risk.
Naturally, P2P lending is higher risk than sticking your money in a bank. Borrowers could default on your loans meaning that your overall returns could be reduced by bad debt. However, even if this does happen, you could still generate higher returns than those offered from savings accounts. For example, according to Funding Circle, 93% of its investors that have invested £2,000 or more for a year and spread this across 200 different companies have generated returns of 4% or higher.
So, if you’re serious about making your money work harder for you, peer-to-peer lending could be worth a look.
Lifetime ISA
Lastly, if you really want to turbo-charge your savings, consider putting some money into a Lifetime ISA account. With this account, any money that you put into the account will be topped up 25% by the government just weeks later, meaning that your savings could grow at a prolific rate. Of course, such a good deal does have restrictions, and you have to be aged between 18 and 40 to open a Lifetime ISA account. You also can’t withdraw your money until you either turn 60 or buy your first property. Restrictive conditions, sure, but you can’t deny that a 25% cash bonus is a fantastic offer in the current low-interest-rate environment.