Cash savings to beat inflation

Even with inflation falling, low saving rates mean you’re losing out in real terms. So what can you do? Here are my top places to put your cash to make as much as 5%.

When prices for goods and services are on the up it’s called inflation, and the inflation rate is just the average of those increases. But if your income – whether from a salary or savings isn’t keeping up with that rate, then the cost of living is going to be more expensive.

Last month the inflation rate hit a two year low of 1.8%, yet even the best standard savings accounts and ISAs offer around 1.5%, meaning your money held in these accounts is actually losing value! Last year’s interest rate rise has helped boost those a little, but still not enough to be on par or beat the rate of inflation.

New savings accounts such as the one from Marcus at 1.5% is better than most places but still not enough. And this month Tesco Bank announced the end of its 3% rate for new current account customers (it’ll remain until 14th June for existing customers).

Fortunately, there are a handful of other places where you can beat 1.8%. Here are my picks of inflation-beating instant-access accounts for your cash savings.

5% interest on savings for all

These are the highest paying accounts, and you can access your money at any time. However the amount of money you can save in them is limited

Nationwide FlexDirect Current Account

You can get 5% for one year on a balance up to £2,500 with the FlexDirect account. You do need to pay in £1,000 a month to get this rate. If you know anyone with this account already you can ask them to refer you, and you’ll both get a £100 bonus (If you know me personally I can share my link with you so just ask).

Afterwards it will drop to 1%, but you can always switch away when that happens and get a nice cash bonus for doing so. However I’ve kept mine to get the regular saver (more of these further down the page).

TSB Classic Plus

The TSB Classic Plus offers interest on far a lower balance – you get the 5% on just £1,500 – but there’s still the potential to get three if you and your partner have one each and open a joint account. You need to pay £500 into the account every month to get the interest.

3% interest with the potential for 5%

Chip savings app

I shared my review of this app last year. I’m a fan, particularly of the high-interest rate. Users start with 1%, but you can start with is 3% thanks to a promo code I’ve blagged. Enter CLEVER3 when you sign up and you get 3% for a year. You can save a max of £600 a month.

To get the full 5% you need to refer two friends (they’ll each get 1% starting interest) and you’ll be boosted by another percent for each of them, Again, it’ll last a year and you’ll need to refer people again in 12 months.

> More on how Chip works in my review

5% interest if you have a current account with these banks

You can only open these Regular Savings accounts if you have or open a current account with these banks – but that’s no reason to put you off. There’s a limit to how much you can save each month, and the interest is calculated on the balance each month. After 12 months the interest is paid and your saver closed. But you can then open up another and begin again.

Nationwide Flexclusive Regular Saver – 5%

If you’ve got any Nationwide current account then you can also open a Flexclusive Regular Saver account. You can only save £250 a month at the end of a year the account will close. Do this for 12 months and you’ll earn close to £81.

 First Direct Regular Saver – 5%

Again, you can only get this regular saver if you have a First Direct current account, but it’ll also give you 5% for 12 months. The maximum you can save is £300 a month. The full amount for 12 months will net you just under £97.

First Direct also has a switching bonus, offering “gift” worth around £150, including an Expedia voucher or wireless headphones.

Marks & Spencer Bank Monthly Saver – 5%

This is the third regular savings account. You’ll be able to save a maximum of £250 a month.

If you switch to M&S Bank you’ll get a £125 M&S gift card, and another £50 over the next year.

HSBC Regular Saver – 5%

You can pay in £250 a month for 12 months with this HSBC Regular Saver if you have an HSBC Premier or HSBC Advance account.

You can get £200 for switching to HSBC Advance, moving two Direct Debits, and staying for a year, so it’s worth looking at for 12 months.

Other Regular Savers offering 3%

Virgin Money – open to all

You don’t need a Virgin Money current account to get this one at 3% for one year. Max deposit of £250 a month. Unlike many of the others you can also withdraw money as often as you want without a penalty. You do have to open it up in branch.

Santander Regular eSaver – 3%

If you have a Santander 123 account then you can 3% for its Regular eSaver account. The monthly maximum is £200.

But since there is a fee for that account, I wouldn’t open one to get access to the monthly saver. In fact, even if you do have one I think you’re probably better off moving your savings elsewhere and opening a Natwest Reward account for cashback on your bills.

> See my comparison between Santander and Natwest’s bill cashback accounts

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