Interest Rate Rise will Punish Investors and Economy

FUTURE PROOF: The average Briton has more than £20,000 tucked away for a rainy day - but with threat of interest rate rises looming this figure may well fall

Emma Wall 15 May, 2014 | 4:21PM
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How much cash have you got stashed away for a rainy day? Cash savings are an essential part of any investment portfolio – providing liquidity and necessary diversification. Yet nearly 10 million Britons have no savings at all. Despite inflation falling to below the Government’s official target rate, lack of wage growth has meant households are still feeling the squeeze.

The average saver has a cash buffer of £20,380 according to high street bank Santander, although this falls to £13,070 for women compared to £28,079 for men when analysed by gender. On average we save £110 a month – but all this is set to change when interest rates rise.

Chancellor George Osborne has strung a noose for his own neck – his austerity measures have so improved the UK’s economy he has little choice but to raise interest rates before the next election. Although in theory an interest rate rise is good for savers, the reality is not as simple.

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About Author

Emma Wall  is former Senior International Editor for Morningstar