If you’re looking for the best place to put your money, it’s a difficult question to answer right now. Savings, property and gold have typically been seen as good places to put money and watch it grow, but the desirability of each can seriously vary over time. Here’s a look at saving or investing in the UK markets.
A great thing about British banks is the FSCS: the Financial Services Compensation Scheme. This is the UK’s ‘statutory fund of last resort’, which basically means it can reimburse people for money lost when financial firms go bankrupt (or are ‘unable, or likely to be unable, to pay claims against them’). This can cover people to the tune of £85,000 per firm.
On the other hand, the base rate / bank rate in the UK is at an all-time low of 0.5%, while inflation is officially 5.2% (as of September 2011). So the value of a pound is actually shrinking more rapidly than usual, but savings accounts aren’t paying much in the way of interest – a quick look on a comparison site shows that the highest-interest instant-access savings account offered around 3.1% at the time of writing.
The good news about property values in the UK is that they’re holding quite steady (compared with many places in the US, for example), although the South (especially London) is doing markedly better than the North.
Looking ahead, however, opinions are divided on what’s due to come next, with some people pointing out how house prices have withstood many of the financial shocks we’ve had in recent years – and others predicting a major dip in house prices (when the base rate goes up, if not before).
Property prices aside, rents are high in much of the UK, which is one reason there are so many ‘amateur’ landlords. According to charity Shelter, rents increased one-and-a-half-times as fast as incomes between 1997 and 2007. The average monthly rent for a two-bedroom property in London is £1,360 – far higher than the £568 average in the rest of the country.
Gold has traditionally been seen as a ‘safe haven’ in troubled times – something many people will buy when the values of stocks and shares are unpredictable.
According to goldprice.org, the price of gold has just about trebled in five years, rising from $600 an ounce in mid-2006 to over $1,800 in 2011. However, ‘what goes up must come down’, as they say – it’s dropped a fair bit since then, and there’s no sure way of predicting what’s next.
Don’t gamble with…
As always, you shouldn’t gamble with what you can’t afford to lose. Someone with cash to spare who’s looking to make some real profit might feel confident about investing in higher-risk ventures – but someone who needs somewhere safe to put their hard-earned money will want to be a lot more careful.