`Inflation-proof` savings to protect against debt

23 November 2009

Savers should choose their account carefully to ensure their money grows faster than inflation, according to Moneysupermarket.com, after the official (CPI) inflation rate rose to 1.5%.

The price comparison site said that basic-rate tax payers would need a savings rate of at least 1.875% to benefit in real terms from their savings. Higher-rate taxpayers would need a 2.5% interest rate for the same result.

Kevin Mountford, head of banking at Moneysupermarket.com, said that almost three quarters of savings products overall do not give savers real returns on their cash. However, he said that over half of regular savings accounts will provide real returns.

A debt expert at Think Money said that finding the right savings account is important for people looking to protect themselves against debt.

"Savings rates have taken a hit since the base rate was cut to 0.5% earlier this year, but there are still many accounts available that can provide real returns.

"Savings can offer a lot of protection against debt in the event of unexpected costs, so it makes sense for people to look for a savings account with a good interest rate."

Tags: debt, inflation

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