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How safe are your savings?

Given the last few months, you’d be forgiven for being a bit worried about your savings. And fair enough. First there was last year’s Christmas savings account collapse then Northern Rock happened resulting in queues of terrified customers standing in line to get their money back. And on top of that we’ve had problems with RBS, everything going haywire in Iceland and the collapse of top US bank Lehman Brothers. So how safe are the savings you’ve worked hard to put away? Between a rock and a hard place Surprisingly, the Northern Rock debacle actually did some good. Before it ran into problems, only £2000 worth of your savings were completely covered should anything happen, with the next £33,000 (if you’re lucky enough to have it) only 90 per cent covered. Now, you’re fully covered for up to the first £35,000 by the Financial Services Compensation Scheme (FSCS). The trick here then, is to make sure that if you do have more than that, you spread the wealth. Don’t put more than £35,000 in any one place and you’ll be assured to keep the lot should anything happen. What you do need to double check though is that you’re saving your money with different companies – remember, many banks are all part of the same group (Think HBOS owning the likes of RBS, Halifax etc.). You need to ensure the money is with completely different organisations each time. Foreign exhange Another thing to consider is whether you should put the money abroad. Right now, the best advice we can give is; no, you shouldn’t. It might sound great being able to tell your mates; “oh yes, all my money is offshore…” but since countries the world over are having problems, keeping it in Britain is the best move. Why? Well, we know the rules here. The Government will make sure your savings are covered as per the £35k rule above, and if anything else changes you’ll be sure to hear about it pretty quickly. If, as with the Iceland collapse, things happen abroad – can you really be sure you’ll get your hands on your cash? The same rule applies if you already invest abroad; now might be the time to play it safe and cash in. Don't go to the mattresses If you’re in a lower income bracket, your savings perhaps mean more to you. There are a couple of alternatives you can look at if you’re really put off giving your money to the bank manager. One of the safest financial institutions is National Savings & Investments (NS&I). They’re completely backed by the Treasury. It does mean that the interest rate is less, but on the flipside your savings are tax free. Another alternative is to try a local credit union. They’re not as common here, but they’re very popular in the US and many other countries. They’re great for saving (or borrowing) small amounts of money and have started offering a wider range of services such as children’s savings accounts, Christmas savings accounts, fixed-term savings and ISAs. Ultimately, as long as you have less than £35k in any one place, your savings should be safe – and they’ll certainly be better protected than they would be stuffed underneath your mattress… Check out the best savings account for you