Current interest rates in the UK
How long does it take to buy different items using a savings account?
Even before the pandemic hit, interest rates were extremely low and just before lockdown they reached their lowest recorded level (0.1%). While this means it’s now a great time to borrow, the current low interest rates are bad news for savers.
We have researched interest rates and how much you are really getting for your money from keeping your cash in the average easy-access savings account. So, is keeping money in a savings account nowadays really growing your money?
- The average easy-access interest rate is currently 0.23% and the average UK citizen has savings of around £6,760.
- This means the average person saving would need to wait 16 months to purchase a £20 takeaway using interest they earn.
- Saving for a car in the 2000s could be done in under 28 years – 507 years fewer than now.
We analysed 236 accounts across the market and discovered the average interest rate for easy-access savings accounts is currently just 0.23%. This means it would take someone with an average savings amount of £6,570 more than 535 years to purchase a new Ford Fiesta.
Saving for 6 years is needed to generate enough interest in order to purchase a new pair of £100 trainers. It would take over a decade for anything costing a few hundred pounds or more. To purchase a PlayStation 4, costing around £250, with the interest earned, 16 years of saving is required. If you planned on buying a flight to New York priced at around £599 the saving period lengthens to a phenomenal 35 years.
Saving using historical savings rates
The average interest rate in the 2000s was 4.45%, meaning that the average Brit could purchase a new Ford Fiesta in a fairly short 28 years if interest rates remained the same. This is quite a contrast to the impossible 535 years it would take in the current economy.
Likewise, a flight to New York previously took 2 years of saving compared to 35 years and for a pair of £100 trainers it would have taken 4 months in contrast with 6 years.
|Chocolate bar||1 month||2 months|
|Cinema ticket||1 month||7 months|
|Takeaway||1 month||16 months|
|Trainers||4 months||77 months|
|PlayStation 4||10 months||190 months|
|Flight to New York||22 months||415 months|
|New car||333 months||6,424 months|
|Downpayment||528 months||10,180 months|
How long it would take to save up for items with £600 in savings?
Our previous research revealed a third of Brits have £600 or less in savings. In this circumstance it would take more than 14 years to make enough interest to purchase a £20 takeaway. Even purchasing of smaller products would involve a lengthy saving period, with a cinema ticket taking nearly 6 years and a 200g £2 Dairy Milk bar requiring 18 months. If you had planned on buying some new trainers with the interest acquired from £600 savings, you would have the money to do so in 67 years.
|Dairy Milk 200g chocolate||1.5 years|
|Cinema ticket||5.8 years|
Finder’s savings expert Matthew Boyle’s gives his advice:
“Putting our spare cash into a savings account has been the norm for generations. This made a lot of sense because interest rates were significantly higher than they are now – for example, the average rate on savings accounts only dropped below 5% twice between 1980 and 2000.
“However, the savings landscape is very different now. While your money is not at risk when you save, the average interest rate of 0.25% on easy-access savings accounts at the moment is significantly below inflation, so you are still effectively losing money.”
If you are keen to look at other options to grow your savings then consider these:
Put your money into a good savings account Premium bonds Consider a stocks and shares or lifetime ISA
If you’re keen to continue saving with a bank then ensure your money isn’t sitting in an account that doesn’t pay interest. Even though interest rates are low at the moment, there are still a wide range of rates out there. Alternatively, you could also keep an eye on current accounts, like with Nationwide, Natwest and RBS, that previously paid out joining bonuses. The bonuses are all on pause due the current pandemic, but they may be started up again over the next few months.
This is another option where your money isn’t at risk. It works by offering cash prizes every month instead of guaranteed interest, so while you could end up not winning anything, the top prize is £1 million. When you look at the total amount of prizes paid out, the effective interest rate is currently 1.4% each year.
If you are willing to take a riskier option for your money, now could be a good time to put some of your savings into an ISA. Markets like the FTSE have historically outperformed savings accounts and they still haven’t fully recovered from the coronavirus disruption, although your money is at risk of decreasing with this option. If you’re saving for a house or retirement then you should also look at lifetime ISAs as the government will give a bonus of 25% on what you pay in (up to £4,000 per year).
For all media enquiries, please contact
- Finder analysed the average interest rates of 236 easy-access savings accounts on the market (as of 29 June 2020), with the average rate of interest being 0.23%. The compound interest you would earn with this per month was then calculated with various different starting amounts to work out how long it would take to afford a range of items with the interest.
- The average interest rate of the noughties (between 2000 and 2009) was calculated by looking at the yearly averages, as done by Swanlow Park.
- The average savings amount of £6,760 came from a survey Finder commissioned with OnePoll in April 2020.
Non-contact infrared thermometers are the safest way to check your temperature.Read more…
We’ve done some research to see if the British public are still keen on travelling abroad and whether any countries will be avoided.Read more…
Face mask news and where to buy during COVID-19. Find in-stock sellers, how to make them, wear them and more.Read more…
Finder speaks with investment experts from around the world about what investing looks like in a post-COVID-19 world.Read more…
Over a third of Brits have had to dip into their savings pots during the COVID-19 pandemic.Read more…
The coronavirus pandemic has seen waves of fundraising, but which fundraisers and crises have Brits donated the most money to?Read more…
More guides on Finder
Pension withdrawal statistics
A quarter of non-retired Brits have withdrawn from their pension during COVID-19.
How to invest in cryptocurrency
Learn how to get started investing in cryptocurrency, the methods available to you, and what to keep in mind before making your first purchase.
Saab 9-3 insurance group
Find out which insurance group the Saab 9-3 falls under and how much it costs to insure.
Mitsubishi ASX insurance group
Find out which insurance group the Mitsubishi ASX falls under and how much it costs to insure.
Finder’s Bitcoin Predictions Report: December 2020
We asked 47 experts for their cryptocurrency price predictions and took a deep dive into the Bitcoin price rally.
Porsche Cayman insurance group
Find out which insurance group the Porsche Cayman falls under and how much it costs to insure.
Porsche 911 insurance group
Find out which insurance group the Porsche 911 falls under and how much it costs to insure.
Mazda 5 insurance group
Find out which insurance group the Mazda 5 falls under and how much it costs to insure.
Jeep Cherokee insurance group
Find out which insurance group the Jeep Cherokee falls under and how much it costs to insure.
Kia Soul insurance group
Find out which insurance group the Kia Soul falls under and how much it costs to insure.
Ask an Expert