Saving rates, the amount of interest paid back to you by your bank or building society, are a vital consideration when trying to grow a nest egg.
Changes in inflation can impact saving rates and could see the growth of your nest egg stall.
Given that the Government are committed to bringing down inflation, it is worth considering how this may impact your nest egg.
Why might saving rates drop?
Financially astute savers may be aware that savings rates are not directly tied to inflation and so do not automatically shift as inflation rises and falls.
However, saving rates are determined by banks, which often adjust interest rates in order to manage the impact of inflation on the economy.
As there is a disconnect between saving rates and inflation, it is rare for saving rates to consistently reflect the changes in real world value of money.
The value added to your nest egg may decline in real terms over time, even if the saving rates themselves do not change.
How can nest eggs be protected from the impact of inflation?
Rather than leaving nest eggs exposed to the economic winds brought about by inflation, it is better to invest in more stable savings structures and diversify our investments.
Fixed-rate bonds or ISAs will generally have more stable rates of return that can allow your nest egg to grow in a tax-efficient way.
If you are not opposed to risk, you could consider stocks and shares ISAs or similar investment strategies to increase the chance of your nest egg growing.
The most vital thing to do is ensure that your nest egg is in a position to grow. This means moving it out of any accounts that are paying little to no interest.
Our expert team can help you review your current savings strategy so that you can make the most out of your nest egg.
