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Tuesday, 23rd December 2008

Bank of England interest-rate change
On the 4th of December 2008, the Bank of England again reduced their interest rate (often referred to as the 'base rate'), to the lowest level since November 1951.

But, what does that mean for customers?

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Saving and investing basics

What are your goals in life, and how are you going to afford them? It's worth considering what money you'll need and when. This may include short-term goals, such as saving for a car. Or it may be longer term, such as saving for a deposit to buy a house.

You can potentially make your money 'grow' using savings and investments. However, you need to know what suits your plans, and understand the risks involved. You can lose, as well as make, money.

These articles will help you understand:

  • how to avoid scams
  • the key differences to savings and investments
  • interest rates

Quick intro

If you take only one message away from this section of the website, it's this: be wary of investment scams. Protect yourself! If someone contacts you with information on an investment scheme that sounds too good to be true, it probably is. Always check that anyone offering or advising on an investment scheme is authorised by the FSA. You can do this by checking on our register. The link is below.

What's the difference between savings and investments?
Our booklet 'Just the facts about saving and investing', linked to below, sets out the differences in full. We strongly recommend that you read this if you are considering saving or investing.

The main differences are these:

  • Savings tend to be for short-term goals, or for when you may need to access the money quickly. You put your money into an account where it earns interest, without the risk of losing any of it (short of a bank, credit union or building society collapse). Savings are referred to as low risk.
  • Investments, however, are for the longer term. Investments generally involve schemes or funds based on the stock market. You take a risk with your money by investing in assets that can go up or down in value.

Interest rates
You earn interest on savings. Generally, the higher the interest rate offered the better. But be wary of very high interest rates as there may be some catches. For example, some savings accounts offer high interest for an introductory period only. You also need to consider whether the interest is:

  • fixed, or variable
  • monthly or yearly

Find out more

We've put together a short list of resources you may find useful. This is a cross-section to start you off, but you may want to do some more research. Some of these resources are on other websites, so you need to be aware that the FSA is not responsible for content you find on these websites.

Users can rate articles with between one and five stars; this is not an FSA rating. But we have marked the articles 1-3, based on how detailed they are. If you are looking for a very quick introduction, look for level 1; if you are ready to find out more, go for a 3.

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 FSA Recommended
3
 Detail (1 = basic, 3 = advanced)
More information
 More information

Articles

Direct.gov.uk - Information on the options for savings
Information on the savings options for young adults.
Moneymadeclear - Introduction to saving and investing
This leaflet, from the FSA, is about savings and investments. It explains the differences between them, sets out how they work, and points out some of the risks involved. (pdf format, you'll need to have Adobe Acrobat Reader installed to view this.)
Financial Services Compensation Scheme (FSCS)
Information on The Financial Services Compensation Scheme (FSCS).

Budgeting tools

FSA - Register
MONEYmadeclear logo
This is the link to the FSA register, where you can check if we authorise a firm.
This is Money - Savings Calculator
thisismoney logo
If you go to the Savings and Banking section, have a play with the long-term savings calculator. The best way to understand interest rates is to see them in practice.