Savers have been told they are missing out on money by leaving it in low interest accounts (Image: Getty Images)
A caution has been issued for individuals who have £5,000 in their bank accounts. A recent study discovered that a quarter (24%) of people leave money idle in current accounts at the end of the month rather than transferring it into a savings account, according to a survey.
Many current accounts offer zero or minimal interest, meaning individuals could be at risk of witnessing inflation diminish the real value of their cash.
One in six (17%) of this group leave more than £5,000 idle in their current account, with men being particularly prone to leaving large sums of cash not earning interest, according to the survey, commissioned by banking provider Chase.
Shaun Port, managing director for daily banking and savings at Chase, stated: “Every pound you save should be working as hard as possible for you.”
Transferring your money into a higher paying interest account is a straightforward step that can make a real difference – helping your savings grow faster and bringing your goals within reach.
“We know consumers feel proud and motivated when they see their money moving in a positive way.”
Compounding interest is a powerful tool that allows your savings to grow faster over time. The main advantage is that you earn interest not only on your original deposit but also on the interest that accumulates, creating a snowball effect.
“This means your money works harder for you, and even small amounts can grow significantly if left untouched. When you create a positive habit, consistency follows.”
Some 3,000 people across the UK were surveyed. People with money sitting idle in their current bank accounts were issued a stark warning after more research. According to a study by Yorkshire Building Society more than 12 million current accounts in the UK are thought to be earning 1% or less in interest on balances above £5,001.
This means individuals are missing out on a significant amount of interest – and potentially their money could be working much harder for them. Tina Hughes, director of savings at Yorkshire Building Society, said: “With household budgets under pressure and financial stress rising, it’s clear many are feeling the pinch.
“Yet millions are still missing out on easy wins – like earning interest on their savings.”
More than half (55%) of respondents in the latest survey said they feel stressed about their finances and nearly a quarter (24%) plan to use a credit card to cover the cost.
Among those borrowing, expectations around when they will clear their debt vary widely. Around half (51%) expect to clear festive debt within three months, whilst a quarter (24%) anticipate taking up to a year.
Yorkshire Building Society also used analysis of Caci’s current account database for the research into interest on accounts.
Earlier this year research showed a staggering £526 billion is estimated to be sitting idle in current accounts earning no interest, data shows.
It means some 29 million people miss out on £20billion annually in interest by leaving money languishing in current accounts and not moving it to high-interest savings accounts, research conducted by Spring Savings, a new savings app launched by Paragon Bank, showed.
One in three people have £5,000 sitting in their current account, whilst the average current account balance is £2,067. Derek Sprawling, of Paragon Bank, says: “High street banks are offering little to no interest on savings whilst making it unnecessarily difficult to access better alternatives, resulting in the rise of ‘current account coasters’.”
The issue extends beyond merely poor savings rates—a more fundamental challenge appears to be indifference amongst savers. Many individuals aren’t actively overseeing their savings or searching for the best accounts to ensure their money grows as much as possible.
According to Paragon, one in ten people admit they leave money in their current accounts simply because they haven’t yet got round to transferring it to a higher-paying savings account. Another 11 per cent report that they have no particular reason for not moving their funds to a high-interest account.
Interestingly, just over 20 per cent of people say they keep money in their current accounts as a rainy-day fund, suggesting that for some, the convenience of easily accessible funds outweighs the potential for better interest returns.
For savers who actively pursue higher returns, the difference can be substantial. For example, if £5,000 were placed in the best easy-access savings account paying 4.76 per cent interest, it could generate around £243 in interest.
In contrast, the average current account balance of £2,067 would only earn around £175.56 if placed in the same high-interest account.