Savings - Where is a Safe Place to Keep Money?

Where Should Ordinary People Save During the 'Credit Crunch?

Sep 26, 2008

With banks on both sides of the Atlantic going bust or being taken over, everyone is wondering where it is safe to save one's money. Here are ways to keep savings safe.

The recent so-called 'credit crunch', and a possible recession looming, means that many people no longer trust the banks in the way they used to. Those with money to invest in stocks and shares usually take expert advice, as do people with large amounts of money invested in property or similar places. But for the smaller investor, the ordinary person, it is hard to know what to do. Where should he or she keep their hard-earned cash?

Cash Under the Mattress?

With banks collapsing, it is tempting to take all one’s money in cash and hide it. But this is not a good idea! Theft from the home is far more likely than a bank going bust, and only small amounts of cash are covered by home insurance policies. Although it may look like a good idea to have savings safely hidden away, this is really not recommended.

National Savings and Investments – the Safe Option

They’re not exciting, and savers won’t make a fortune from their interest rates. But in the UK, the safest place to keep money is in one of the National Savings accounts and bonds. NS&I is the government's savings bank; it is backed by the Treasury, and is therefore probably the safest place to keep your money in Britain. Its popularity has been increasing ever since the collapse of Northern Rock, and interest rates on some of its popular accounts have been going down. But it is a safe haven.

In other countries, look for something similar – government run and backed savings schemes are safe.

The Banks – Spread Money Around.

In the UK, there is an official rescue fund called the Financial Services Compensation Scheme that protects savers if their bank or building society goes under. It guarantees £35,000 per person per financial instritution. So savers who have more than this should spread their money between different banks, and check as to who owns who; eg, Bank of Scotland, Halifax, and Lloyds are all now considered as the same institution…or may be quite soon!

There are similar guarantees in the rest of Europe, although usually not quite so generous. Those living in other countries should check and see if their own place of residence has such a policy, and if so then act similarly.

What About Building Societies?

These are probably a safe haven in times of trouble. Building societies tend to help their own, with one stepping in if another gets into trouble. And they are immune from speculative attacks because they are not quoted on the stock market.

The golden rule is: Do not put all one’s eggs in one basket. It is safer to spread money around in different accounts with different institutions. It is also worth bearing in mind that small savers are very unlikely to lose money, even in these difficult times. And some day, things are likely to improve!

The copyright of the article Savings - Where is a Safe Place to Keep Money? in Building Personal Savings is owned by Helen Krasner. Permission to republish Savings - Where is a Safe Place to Keep Money? in print or online must be granted by the author in writing.