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Savings Advice

What will I learn here? When interest rates are low, putting money into a savings account generates dismal returns. But used intelligently, that money can generate far better returns for you.

The trouble with the notion of saving is that, well, it's just a little bit dull. Remember those kids we went to school with who used to put some of their pocket money away each week? They generally weren't the ones in our gang.

When my parents encouraged me to save, it generally seemed to involve putting coins of small denomination into a brightly coloured plastic piggybank only to open it some time later to find exactly the same amount there. Barely enough to buy a Mars Bar, and zero growth to boot.

Now I've grown up (allegedly), the thought of saving still fails to excite my senses. And with interest rates at such a low level, it's next to impossible to get excited about salting a few bob away every month into a building society account.

There is, I think, a real problem here. Apparently, 44 per cent of people have no savings at all. I appreciate that some of those 44 per cent have no choice in the matter, but a tidy chunk of people don't save but could if they really wanted.

Perhaps you need to bring to the savings party the sense of risk and excitement that exists in the world of investing. So, instead of putting a set amount away every month into a low-interest (in every sense of the phrase) savings account, let's start speculating to accumulate.

I'm not necessarily talking about investing in the stock market, even though we've all seen those figures that get trotted out regularly to show that - in the medium to long term - investing in the market has consistently outperformed a building society account.

There are plenty of other ways to build a better return. I know a number of people who wouldn't dream of dabbling in stocks and shares, but who use their knowledge of a particular market to build their savings.

One chap I know has an expert knowledge of brass instruments. Instead of putting a set amount into a savings account every month, he uses that money to buy instruments, which he refurbishes and then sells on at a tidy profit. I know somebody else who buys books from second-hand bookshops and then sells them on eBay or Amazon - again at a profit. In both case, the profits they're making far outstrip the interest rates available. Just as importantly, they're both really enjoying turning a hobby into an income stream.

Of course, there is a level of risk to this - just as there is in playing the markets. But in the case of my two chums, and I suspect thousands of people like them, they have confidence in their knowledge of their particular niche market, and they see real merit in using their savings to fund an enjoyable pastime with the prospect of gaining returns on investment that puts more traditional saving methods into the shade.


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