In times of economic crisis, it’s normal to want to keep our money somewhere safe.
It’s a natural human instinct: keeping our money safe means we’ll be able to take care of our families, our belongings and our future. So when the economy is a little uncertain, one of the first things we do is take care of our money.
Although we know that the economy will eventually recover, we do believe in the importance of sleeping well at night knowing your money and future is safe. We put together some places you could keep your money knowing that it’s somewhere safe.
It’s likely you already have a savings account. This kind of bank account is a place where you can hold money which you don’t need access to regularly. These accounts are different to current accounts in that they usually pay a little more interest.
In the UK, your savings accounts are protected up to £85,000 by the FSCS. So no matter what happens to your bank, you are covered.
The main advantages of savings accounts is that they are accessible, easy to use and safe. You can easily open a savings account online or on the phone and transfer your funds. The main disadvantage is that interest rates on savings accounts are generally low, and not enough to beat inflation. During the current 2020 economic crisis, the maximum you will get on a savings account is an interest rate of 2.75% (lasting a year), which barely covers the annual inflation of 2%. Your money will be safe and protected, but you won’t be growing your wealth.
A cash ISA is just like a savings account, but the main difference is that the interest is not taxed. This means that you’ll be able to keep any interest you earn.
Anyone over 16 is allowed to put up to £20,000 per tax year in a cash ISA, and can keep it in their account every year, tax-free. Fixed-rate cash ISAs may offer higher interest rates than a normal savings account. However, you won’t be able to access the cash in the short term, and may have to pay penalties if you withdraw early.
The main advantage of a cash ISA is – like a savings account – that it’s relatively easy to open and you’ll have liquid cash in your account. However, the disadvantages are similar too: interest rates are still not much higher than inflation. At the time of writing (April 2020), cash ISAs pay interest rates of 1.26% (for several years). Yes, that’s lower than the 2% inflation rate.
If you’re willing to step away from liquid cash and want a higher return on your investments, government bonds (also called gilts) are another secure way to hold your money.
The British government issues gilts in order to raise money for roads, buildings and education. You buy a gilt and the government repays the debt over a certain amount of years, with interest.
This is a very secure investment because the British Government has never missed payments or gone bankrupt. You can start with as little as £1, although people usually buy gilts in £100s. Gilt interest rates (called coupons) are higher than with savings and cash ISAs, with some paying up to 4.75%. The main drawback is that you won’t have immediate access to your cash and you would need to sell your gilt before getting your money back.
You can buy gilts directly from the government or invest in a “gilt fund”. Usually, the best way to buy gilts is through an online stockbroker. Make sure to compare fees and do your research before opening a stockbroker account.
If you’re looking to diversify out of the international monetary system and buy something that has held intrinsic value for centuries, gold is the place to invest.
Gold has intrinsic value, and has been a source of wealth since the time of the Egyptians in 3600 BC. Today, 50% of gold is in jewelry and 40% is in physical investment by individuals and central banks (you and I). The rest is used in industry (such as in dental products). Due to gold being finite and it being used in industrial products, gold is less likely as an asset to completely lose its value.
Gold is also not part of the monetary system. It’s an asset that you can hold in your hand, that you can feel and touch. It can’t be destroyed by fire, it doesn’t need feeding and no maintenance is necessary. It can’t be hacked either, and it cannot disappear with just the click of a mouse. If tomorrow the internet crashes, your gold will still be there waiting for you.
On top of that, investing in gold will actually grow your wealth: £100k invested in gold in 2006 grew to £286k a decade later, far outperforming inflation and all other assets.
We believe that gold should be part of every investor’s portfolio. This allows you to have a diversified portfolio and hedge your losses in the event of an economic crisis. The main drawback of gold is that you would need to sell it in order to be able to buy products (you can’t buy chocolate with pure gold at the moment!). It also requires some research and education before purchasing.
Having said that, at Minted we make the gold buying process as seamless as possible. With a gold savings plan, you can contribute regularly to buying gold and we’ll take care of the rest for you!
Where is the safest place to keep your money? At the end of the day, it depends on how liquid you want your wealth to be. You may prefer savings accounts or cash ISAs if you want easier access to liquid cash. If you also want to make sure you’re beating inflation and growing your wealth, government bonds and gold will probably be the best investment for you. At Minted, we believe that gold will always be a safe place to put your money, and are proud of making it accessible and affordable for everyone.