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Are you sleepwalking into financial oblivion?

Consumers are faced with an abundance of choice when it comes to managing their money. Do they opt for cash or investments, a bank or a fintech? But instead it seems that millions opt to leave money in old savings accounts instead and this can have huge implications on their returns.

Research from the Financial Conduct Authority (FCA) has found that accounts that were opened more than five years ago pay lower interest rates than those opened more recently. The FCA looked at seven types of savings accounts which included many of the cash products available on the UK market.

Leaving your savings in old cash accounts could cost you hundreds

One of the most popular cash savings products on the market is the easy access savings account. There are over 350 easy access products on the market and around 1,000 products that have customers but are no longer on sale to new customers.

80% of these accounts have not been changed in over three years and there is £354 billion sat in easy access accounts. There is £145 billion in accounts with over £5,000 and £160 billion earning interest rates lower than the Bank of England base rate of 0.5%.

The FCA is calling for improved transparency and is looking for ways to encourage consumers to switch accounts. But at a time when interest rates are at historic lows and may drop even further, is it responsible to advocate switching within the cash savings market when individuals could get better returns from investments?

Could investing solve your saving woes?

Digital wealth managers are changing the investment industry. It is no longer the preserve of the wealthy few, it is becoming more efficient, easier to use and more transparent and from an admin or access point of view there is little difference to a cash savings account.

A Moneyfarm account could be described as an easy access investment account, but when you compare the returns it makes quite a big difference.

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See how a Moneyfarm account could work for you

If you, like the average UK saver, have had £5,000 sat in an easy access savings account for over five years you might be getting 0.25% interest.

You might feel quite pleased with yourself because that £5,000 is now worth £5,062.81 and you have not had to do a thing. But inflation is currently sat at 0.5% which means in real terms you have actually lost money, over £60.

If you had put that same money into an investment account with Moneyfarm you could be looking at a very different story. We will make two assumptions here, the first is that since you prefer saving in cash, you are quite risk averse, so fit into our ‘Cautious’ portfolio, the second is we have only been in the UK for six months so we have used our expected returns from our strategic asset allocation model.

Our Cautious portfolio is anticipated to receive 1.2% annualised returns. After five years your £5,000 could be worth £5,307.29. Not only has your money worked harder for you but you also have not had to do anything as we offer discretionary investment management, which means we do it all for you.

Whilst you could achieve higher returns and a Moneyfarm account does not add to your admin burden you are putting your money at a higher risk than a cash account. The value of your investment depends on market fluctuations and you may get back less than you invested.

As simple as one, two, three

So how do you set up an investment account? First, create an account via our app or the website. Then answer a few questions on your circumstances and attitude to finance, this will assign you to an investor profile. Finally choose the type of account you would like to create, fine tune it based on your goals and you are ready to invest.

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Simple, efficient and low cost, Moneyfarm helps you protect and grow your money over time.

Sign up with Moneyfarm today to match with an investment portfolio that’s built and managed to help you achieve your financial goals.

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As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest.