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Are you a typical consumer with a savings account? Prepare to wait 535 years to buy a car with the interest you’re earning

  • The average Brit has £6,750 saved & the average easy-access interest rate is currently 0.23%
  • A takeaway would currently take 16 months to save up for
  • The average savings rate from the 00’s would allow you to save enough interest for a car in under 28 years – 507 years less than now
  • July, 2020, LONDON –

    Someone in the UK with an average savings amount of £6,750 would need to wait over 535 years in order to buy a new Ford Fiesta with the interest earned from a typical easy-access savings account.

    Personal finance comparison website finder.com analysed 236 accounts across the market, finding the average interest rate to be 0.23%. When this rate is applied to the average savings amount for a Brit (Finder research, April 2020), it highlights how hard it currently is for consumers to make meaningful returns from savings accounts.

    A new pair of trainers costing £100 would require over 6 years of saving, while the wait to afford items worth a few hundred pounds stretches over a decade.

    If you wanted a Playstation 4 costing £250, it would take almost 16 years (190 months) of saving before you could buy it with the interest earned. For a flight to New York costing £559, the saving period stretches to a remarkable 34 and a half years (415 months).

    Even a consumer hoping to use the interest they earn to buy something relatively small would need to wait over half a year (7 months) in order to buy a cinema ticket or 16 months to buy a takeaway worth £20.

    Historical savings rates

    If the average interest rate across the noughties, 4.45%, was available today, a consumer would be able to gain enough interest for a Ford Fiesta in a relatively short 28 years – 507 years less than it would currently take.

    Similarly, a flight to New York would require under 2 years of saving (22 months) compared to more than 34 years, while a pair of £100 trainers would need only 4 months of saving as opposed to 6 years.

    And for those with less savings?

    Finder’s previous research also found that a third of Brits have £600 or less in savings. If this were the case for a consumer, then it would take them over 14 years to gain enough interest to spend on a takeaway. Even smaller items would require a long saving period – a cinema ticket would take almost 6 years (70 months) while a 200g bar of Dairy Milk would need 18 months in order to gain the £2 in interest.

    If you hoped to buy a pair of trainers with the interest from £600, you would be able to do so in 67 years time.

    Commenting on the findings, Matthew Boyle, Banking Specialist at finder.com said:

    “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
    “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 and you could get a fixed-rate account, which typically have higher rates. 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.

    Premium bonds
    “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.

    Consider a stocks and shares or lifetime ISA
    “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 a stocks and shares ISA. Markets like the FTSE have historically outperformed savings accounts and they still haven’t fully recovered from the coronavirus disruption, although you should always remember your money is at risk of decreasing with this option and you could lose it. 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)”

    To see the full research, with detailed visualisations, visit: https://www.finder.com/uk/current-interest-rates

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    Methodology:
    Finder analysed the average interest rates of 236 easy-access savings accounts on the market (as of June 29th, 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 £6750 came from a survey Finder commissioned with onepoll in April, 2020.

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    Disclaimer

    The information in this release is accurate as of the date published, but rates, fees and other product features may have changed. Please see updated product information on finder.com's review pages for the current correct values.

    About finder.com

    finder.com is a personal finance website, which helps consumers compare products online so they can make better informed decisions. Consumers can visit the website to compare utilities, mortgages, credit cards, insurance products, shopping voucher codes, and so much more before choosing the option that best suits their needs.

    Best of all, finder.com is completely free to use. We’re not a bank or insurer, nor are we owned by one, and we are not a product issuer or a credit provider. We’re not affiliated with any one institution or outlet, so it’s genuine advice from a team of experts who care about helping you find better.

    finder.com launched in the UK in February 2017 and is privately owned and self-funded by two Australian entrepreneurs – Fred Schebesta and Frank Restuccia – who successfully grew finder.com.au to be Australia's most visited personal finance website (Source: Experian Hitwise).

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