Is Saving a Scam?

Are fixed term savings accounts a scam?

Well, our savings accounts a scam? Our bank accounts a scam? Is saving money a scam? So I think we've got to answer those questions before we talk about fixed term savings accounts. So first things first, why don't you define what a fixed term savings account is in case someone doesn't know.

So normally you'd have to put in a minimum amount of money for a set duration of time and they'll give you a guaranteed interest rate. And a lot of these are 3 months, 6 months and 12 months where you can't access your money.

And what would be the upside that they would give you for doing that?

One, guaranteed interest rate rather than variable, and two, it normally be slightly higher than what most banks give you.

Well, this is the thing that people don't look at. They might look at what's the highest interest rate. They don't look at what's the extra interest over and above an easy access. It's actually a shocker. I've got it here. The difference between easy Access savings and 6 months fixed term and 18 months fixed term. Okay, and I'll share that, but we have to go back a step. Is savings a scam? Well, do you want to have a go answering it?

Well, I would have thought no, it's my money. I can get to it when I want to. Rainy day.

Okay, so what if I told you that saving money loses your money, but slow enough over time that you don't notice it, but given long enough, it would shock you?

I'm now intrigued.

So if I said to you, hey, save your money with me, I'll guarantee it. And over time it will go down in value, but just like Chinese water torture, you know, slow enough that you don't quite feel it at first. Oh, and by the way, while your money is slowly going down over time and I've guaranteed it, I'll lend it out, I'll invest it. If I want to freeze it, I'll freeze it. If I want to use it for my own operational costs, I'll use it for my own operational costs. If I can make free 5, 6 or 8% on it, but only give you 1.6, that's kind of my deal. And if everything goes wrong, your savings will become my or government assets. How are you liking the pitch of saving money?

Yeah, I'm going to find somebody else. Thank you, Rob.

Well, that is what the banks do.

So they can use it for their own operational costs, invest it, lend it out, and if things go Sideways, then they get bailed out.

Well, imagine there's a war and they.

Need your money, or there's a revolution or a run on the banks and they need your money, are they going.

To go, no, no, no, no.

We've done these £85,000 guarantees.

So imagine them all in the war.

Room and they're going to. Wait a minute.

Before we fight the wars or fight off the revolutions or the big economic.

Crashes or recessions, first thing we must do is pay, pay Kane Barron and Rob Moore their savings back. I mean, if you look in Greece, if you look in Zimbabwe, if you look in China and Japan, these things have happened. Banks have taken savings and they have become government assets. Overnight is government money. So the thing with saving money is if you save it not with the banks and you guarantee beating inflation, it's a good thing. But everyone in, but everyone immediately, when they think save money, they think save it in the banks, get interest from the banks, but they don't understand how much inflation really is. They don't know how to beat inflation. They get lazy. Do you know most people don't even put their money in a high savings account, they just have it in the current account. Have a look how much a current account with, say, Barclays is paying in interest.

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Be 0 point something percent.

They don't make it easy. Currently 1% a gross since lockdown, inflation.

Has been between 25 and 30%. So let's call that 7% a year. Yet you get 1% in your current account. In a Barclay Savings account, a normal one, you get 1.6%. So you've lost 5.4% a year. I would love to be able to create a financial tool where you have two balances in your account. One is the balance of your money that you put in, another one is the inflation adjusted balance. The banks would never allow that because everyone would just take all their money out and there'd be a run on the banks and the banks would be insolvent. The banks are insolvent anyway.

But you know, you get those heads up displays like on your M4.

You know, imagine if you could see a visual which is this is how.

Much you put in.

This is inflation adjusted because what they will do, I've got my Hargreaves Lansdowne.

Account open and which is where I've got some of my money. And so they'll put in your initial investment and then your balance and it.

Will look more with a tiny amount of interest but it won't be inflation adjusted.

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The reason savers are losers is because saving money loses money because historically you get less in interest than inflation. And the fundamental law or rule in making money number one, which they don't teach you at business school is you have to beat inflation. Yeah, rule number one, fundamental number one. So here's the problem as well. If they tell you it's 3% inflation, it's probably 5 or 6. If they tell you, oh, we'll give you 4.7% interest, that'll be locked away forever and it'll be really hard to open and it'll be just used as a headline. And in your current account it's 1. And in your normal savings account it's 1.6. So the banks are some of the best marketers in the world. But most people since lockdown, even in a normal savings account, just living a.

Normal life with a normal bank, they've.

Lost over 5% of their money a year. That's net with a bit. But, but interest rates have been 5%. They've started to go up and they've been 5%. So this is a major sham and scam now exposing the bank's terms and conditions and what other things to invest.

In to beat inflation.

We've done other episodes on or episodes are coming on the More Money show, so we'll leave those. But you asked me about fixed term savings accounts, right? Get this, I won't name the bank, but I've got it here on Hargreaves Lansdowne. So the easy Access account is 4.61%. The 6 months fixed term is 4.79. And like you said there'll probably be a fixed amount. A maximum amount might be 10 grand or 20 grand. Sometimes it's 3 grand. So you're getting an extra 0.18%. But you're taking the risk of not being able to get your money for six months of the interest rates going down in that time and guaranteeing that the banks can have it for that amount of time.

So while everyone's looking for what's the highest interest rate?

No, you should be looking for what extra payoff am I getting if I was offered 4.61 easy access, 6% fixed term. Okay, now I'm getting nearly one and a half percent extra. And if they allow me to put 50 grand or 100 grand or 200 grand or whatever in now, I might be able to earn a bit of extra money. But then the guarantees are only 85 grand. And here's something shocking. You found what you found on Martin Lewis, because Martin Lewis is one of the top money saving experts in the UK and he's got this fucking wrong. Yeah.

MoneySavingExpert.com supposedly the money saving expert. So he's on an article comparing the different fixed savings accounts.

That is, you can't get it out for the fixed term, 612 or 18 months. It's locked. You can't take it out.

Exactly. And he's comparing them all at the moment. And one of the things he says is one of the very first headlines is your savings are protected up to 85,000 pounds per bank or building society. Every bank or building society we mention in this guide is fully UK regulated and you get £85,000 per person protected in the event it goes bust?

I think this is horribly naive because who's back in it? Did you say the uk?

Yes.

Put in the comments how much you trust the UK at the moment. So would you ensure with an insurance company you have virtually no trust in that is insolvent and has made their own roles and has made their own rules that they can be legally insolvent? The UK is nearly 3 trillion in debt and yet we're trusting them with insuring our money. They are insolvent. So there's no trust in the uk, I don't think, unless anyone tells me different in the comments.

So that's issue number one.

It's actually also not per bank, it's per banking group. I cannot believe Martin Lewis has published this. I think it's a major mistake. Supposed to be a money expert. He has said £85,000 per bank. Well, assumption number one, you trust the UK. Assumption number two, if you're going to a war or revolution or run on the banks, you trust that they care about us to give us our money first. And look what's happened in Cyprus and other countries where the banks have. Just record your savings. But go and type in RBS Banking Group. How many banks does RBS own?

So you've got Nationwide, Coots, Lambard, North Central, RBS, NatWest. Surely NatWest. Yeah, there's. There's loads here. It's.

See, it says our brands.

Yeah, that's under NatWest Group. Let's have a look. But, yeah, NatWest, RBS. Ultzer. Never heard of it. Lombard Coutts.

I know, you're a bit young.

Yeah. Holtz Free Agent. Never heard of that one either.

Six, seven.

Yeah.

Or more banks. Yeah, it's not per bank, it's per Banking Group.

So you can have 85 grand in all of these different banks, in my Coutts account, my NatWest and my Lloyds, and then they go bust and they go, oh, sorry, you can only have your first 85. And that's if they actually pay it out.

Yeah. And let me just say this. How much do you trust an insurance company? Have you ever tried to make a claim and couldn't make the claim? You know, I've told you, I parked.

My Aston Martin DBS out there.

One time, a lady reversed into me. I tried to claim on her insurance.

My insurance premium went through the roof. It wasn't even worth me claiming.

I drove out a few days later, I was stopped out at a junction. A guy went into the back of me two fucking times. Two times people crashed into me and I couldn't claim on their insurance because it put my premium up more than it would have cost me to repair it. That's the insurance company's way of stopping you claiming it's a scam. You know this no claims bonus that they started to introduce, what, 20 years ago? It's not a bonus, it's a condition to stop you claiming it's outrageous. I don't trust insurance companies. Like, they've got to make profit, so they're going to do everything they can to avoid you making a claim. And these 85 grand insurance policies are. And these 85 grand. And this 85 grand protection is basically.

An insurance policy that won't get paid out on.

Well, it might, but do you want to risk your money to find out?

No.

I mean, if you went and had.

Sex with a hooker who shagged a.

Thousand guys, she might not have an std. She might not have a disease. But are you going to risk it? And what's the. What's the history and what's the proof?

Yeah.

So back to your original question. Is it worth it? Putting your money. It's funny how they call it long term fixed term savings accounts. Six months is not long term. Well, it depends on the extra interest you're going to earn, not how high the interest rate is. So in this one I've got which is the top rate right now through via Hargreaves Lands. I just like to say it's not actually them, that they are just the vehicle. 4.79 for a six month fixed term, 4.61 for easy access. So I'm only getting 0.18 extra. But what if I need it? Is it? And it's only going to be a few thousand pounds, it's not going to be hundreds of thousands of pounds. So I'm not really getting any extra and I've got no flexibility of taking the money out. And also, what if the interest rates go up? The interest rates go up, you're not going to be able to get the extra interest benefit, probably if it's a fixed intra.

What's the opportunity cost of locking your money away in something like that for six, 12 or 18 months?

Well, where else you could invest it that beats 4.61 or 4.79? Gold has smashed 4.79 a year. Silver has smashed 4, 4.79 a year in the last two months. Crypto has probably done that a week with how much it's flown.

So I don't know.

I just think cash is the lowest form of investment. My experience is that cash is not an asset and a lot of people are trying to invest their cash in cash savings. I don't think you should do that at all. I think you should see cash as your buying power for assets. Earn as much cash as you can as quick as you can. Protect it from itself by putting it into other asset classes that beat inflation or beat the interest rate, which right now is nearly all of them. Gold, silver, crypto. Starting a business, investing in marketing to grow your business. Even the S P500FTSE 100 in the stock markets kicking the ass of cash savings.

But people look at cash and go, oh, cash is earning 4.61.

That's high. No, it's lower than everything else. And when cash is low, it's lower than everything else because cash is the lowest form of asset. It goes down in value. Well, the lowest form of asset that's deemed an asset.

I think the issue is in the psychology that for most people they see that as a guaranteed 4% gain rather.

Than actually a guaranteed 2% loss.

Yeah, yeah.

Or 3% loss.

And really that if you could get that in an app, the real, like you said, the real money and it's just going away each week, each month, losing a few pounds, I think maybe more people would invest.

Well, when lockdown happened and we were having double digit inflation, I had a lot of cash and a major problem and I knew it. So it's good to have a lot of cash when interest rates are really high. And it's good to have a lot of cash when you think the assets are going to crash and you want buying power. They're probably really the two main best times to have cash. All other times it's not great to have cash. And when inflation is high as it has been, cash is one of the worst things to hold. Inflation pushed up watches, pushed up cars. Do you remember a new car would go up in value? Porsche 911 Turbo S that we recently just got paid 120 for it, but that was 170. That was over list price. So inflation pushes assets up, but it pushes cash down. So it's the lowest form of asset. And when inflation is high, which they say it's not right now, but it has been historically and it's more than they tell you, you have a major problem holding cash and you have to get out of cash and get into other inflation beating assets, which right now is most things other than cash.

Thank you.

And remember, if you don't risk anything, you risk everything.

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