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How do you make the most of your cash savings?

a person puts change into a piggy bang while adding up sums

With rates well below inflation, how are you maximising the returns on your savings – aside from investing?

In the past few months we’ve seen inflation rocket, and savings accounts have failed to keep up. While many people with cash to spare may decide to funnel more of it into investments, you’ll need to hold some of your money in cash in case you need to access it.

But are there any ways to hold cash savings without seeing its value totally eroded by inflation?

How inflation affects your savings

Inflation and its effect on savings is mentioned a lot, but it can be difficult to see how this monthly figure can affect your money. 

Inflation – specifically the Consumer Prices Index (CPI) measure of inflation – tracks the price of an imaginary basket of hundreds of popular goods and services. The figure released each month indicates how much the price for buying everything in the basket has changed since the same month of the year before.

Say you were able to buy 50 things from the imaginary basket in January 2021. If your savings haven’t been earning any interest since then, by the time January 2022 came around you could expect to be lacking 5.5% in funds (January’s CPI inflation rate), as prices had increased at a faster rate than your savings.

That’s why it’s particularly worrying when no savings accounts can come close to matching or beating the inflation rate – as is the case right now.

Strategies to make you savings work harder

We’re looking into a few strategies on how you might be able to maximise the interest your savings can earn, without locking it all away for years at a time – when you might miss out on preferential interest rates. 

One option involves splitting your savings sum into six. One sixth is sent to an instant-access account, while each of the other parts are paid into fixed-term accounts with one, two, three, four and five year terms. This way, you’ll be able to withdraw funds from the instant-access account whenever you like, while the rest of your cash earns higher interest rates. 

Then, each year when the term is up, you can take advantage of the highest five-year rates on offer. So, if you started this strategy in 2022, you could take the money in the one-year fixed-term account when it matures in 2023, and pay it into a five-year fixed-term account – maturing in 2028. 

The funds in a two-year account would mature in 2024, when you can also move it to a five-year account, maturing in 2029. Three-year account funds will mature in 2025, which can be placed in a five-year account until 2030, and so on.

This process continues until you have five ‘sections’ of your money in different five-year fixed-term accounts. This means most of your money will be earning the highest possible interest available at the time – and you’ll also get the chance to access extra money every year if you need to.

We want to hear from you

Have you ever tried something like the savings strategy we’ve outlined above? How was it – and do you think your savings earned more interest than if you’d left all of your cash in the same account? 

If you have a different savvy way of dealing with your savings, we’d love to hear about it. 

For anyone who’d rather keep their savings strategies private, let me know in the comments and we can arrange for you to email me directly.

If you’d like to see the latest top-rate accounts, our guides on how to find the best savings account and how to find the best cash Isa are updated every week.


There seems to be a flaw in the “six sixths” savings strategy.

Firstly, the assumption that the return on a five year fixed term will always better than a shorter investment term. That isn’t necessarily so, as followers of bond markets will know.

Secondly, that the interest rate for a new 5-year term investment, at maturity of the original investment in 2, 3, 4 or 5 years will be the same or better than it is now. It may well be, whilst interest rates are rising, but maybe not in the medium to longer term.

Of course, it is never a good idea to have all your eggs in one basket, but any spread-the-risk formula is also likely to reduce the average returns.

I honestly don’t have an answer, but I have come to accept that I have to invest in blue chip, high dividend-paying shares to maintain the value of my capital, and accept a slightly higher element of risk. There seems to be no way out of the current dilema that retail savers have been locked into for the last 20 years, whilst borrowers have priority over access to cheap money.

I agree with Em.

It is not difficult to find 1-year and 2-year fixed rate savings accounts on the high street but to get any higher fixed-term rates you have to go into more specialised areas of investment. Even then the rates are not significantly higher than the 2-year rates but you could be locked into them for up to five years. In the present economic climate it is not even possible to forecast whether interest rates are likely to go up or down in the foreseeable future. When investments mature there is no guarantee that an equivalent product will be available at a higher or even the same rate of interest. I believe it is better to remain flexible at the moment and not gamble on fixed rates for more than one or two years at a time.

This implies that you are using savings to pay for the imaginary basket of goods and services. Most will pay out of income , and for many that income will rise, not necessarily with inflation but better than most cash deposit interest rates.

It also implies that 5/6 of your savings can be locked away – inaccessible – for between one and five years, and that, because interest rates are so low, to attract decent interest income those savings will not be trivial. Interest rates have rarely kept pace with inflation so this strategy will still likely still see a loss on spending value of your cash.

If you have decent savings that can be locked up, and you are not dependent upon them at short notice, I would suggest a stocks and shares ISA where the income and gains are tax free. History shows a moderate risk portfolio is a better bet than cash, but it must be regarded as for the longer term, 5 years plus.

People who do include 3-year plus investments in their plans need to bear in mind that there will almost certainly be quite punitive penalties if it unexpectedly becomes necessary to liquidate some of their savings for any reason; no compassion is exercised over medical emergencies, job relocation, uninsured property loss or damage, or other contingencies.

Malcolm is right. You need to put an awful lot away at 0.5% to 1% in order to get a decent return and if you do have that sort of amount available to spend or invest there could well be more useful choices with no less liquidity overall.

I could despair about the low interest rates, not only for personal savings but also for a charity deposit account which I run for a local charity. However, personally, I do find that having eggs in many baskets helps. I have comparatively little in a couple of interest paying current bank accounts but use their annual regular savings accounts to bump up the interest rate a little. I also use other regular savings accounts when I can find one paying a little more. The advantage of these is that if for some unexpected reason my cash flow takes a hit, I can always reduce the monthly amount I pay to a negligible amount in order to release monthly funds. I also use Premium Bonds to hold cash that I may need to access that year but that has been released from regular savings accounts (vehicle purchase/expensive holidays). Yes, I know the return is low but I can access the cash very quickly. Although I have stocks and shares ISAs, these are either used to pay a small amount of quarterly income or are accumulators to grow in value. I have looked at the 5 year bonds but really don’t like the returns offered. I have used the NS&I bonds but simply to hold savings somewhere less volatile/risky than the stocks and shares ISAs.

Charles Ross says:
20 February 2022

I will be enjoying a big pay rise this year …. The New year resolution has stuck right into mid February…. Only one 175cl glass of wine per day before evening meal.

The strategy suggested in this article is a long term one that needs five years to set up. It also divides the savings capital by five so that any one account is only a fifth of the whole amount and therefore gaining a fifth of the interest. The other flaw is that a demand on one of the five savings accounts wrecks the scheme for that year since that savings portion has to be replaced. It is too true that savings accounts, long or short term, pay a small rate of interest and money in them devalues over time, so the strategy outlined above really only lessens this by a very small amount. You have to spend time and gain expertise to save with the stock market. It is possible to pay out (thus eroding capital) and get expert help, but this has not been fool proof in the past and shows that dealing in stocks and shares is something akin to other forms of gambling: one invests money with some plan or considered knowledge and hopes that the investment will be wise. In other gambles, experts consider a horses form, and study the odds to make a gain or become skilled in the card game they play. They also spend time refining their betting strategy. Most of us don’t have that skill or time to do this.
Like the savings scheme above, the need to split a portfolio across a number of investments dilutes the capital in each and thus the returns. Of course it also balances out the gains and losses in the hope that the former will be greater than the latter – but it is just a hope, not a certainty.
There is no real solution to all of this. One can take huge gambles and huge risks. One can take a structured gamble and moderate risk, or one can simply accept that capital has to be added to and one way of providing interest is to add it yourself!

A decent financial advisor investing your money on a discretionary basis in shares and bonds in an ISA does not charge a lot. The risk can be agreed from low to high. My experience has been one of capital growth in a modest holding and a useful return in dividends that can be taken, if required, tax free.

The best way to make use of your savings and keep it under your full control is to buy and sell whatever you are interested in or have some knowledge of. In other words, do the work yourself.

It depends what you call – not charged a lot . I thought £450 was expensive as a 1 off fee to set up a £20k Stocks /Shares ISA plus annual management charges.

Robert Jones says:
21 February 2022

I think you would be better off with a tracker with no managment fees from a platform such as Vanguard. Which has already published lists of recommended stocks and shares ISA providers. If you had £100,000, Interactive Investor would also be good value.

Investing successfully in the stock market requires more expertise than is possessed not only by most savers, but also, it seems, by most professional wealth managers. An alternative that I am currently trying is to use one of several companies that specialise in devising a standard portfolio of stocks likely to do well, details of which can be bought for a non-trivial but not unreasonable fee, renewable annually. Some of these companies publish impressive performance figures showing how the return on investments in their portfolios in previous years would almost always have out-performed the market by a substantial amount.

It’s impossible to accurately predict the future. At any time an event like 9/11, Covid or war in Europe can send stocks tumbling and it takes years for them to claw their way back.

I have been following a similar strategy for several years although not quite as described here. I have split my cash savings over four scenarios – instant; 1-year fixed; 2-year; and 3-year. I have also allocated it, not equally, but according to my estimation of what I feel I can sustain. I have aproximately 10% instant and 30% each in the other 3 which I then reinvest on a rolling basis. I also have other reserves which can be called upon if needed (Premium Bonds for example)

Dave — As a matter of interest, are you topping up each investment every year [if permitted] in order to keep up with inflation, or do you add funds as each investment matures and reinvest in the same or an equivalent product? The instant access savings can be used as a feeder account for the others so it is worth building it up continuously and then when the others mature you can give them a little boost. I think that is possibly the easiest way of getting the most benefit from compound interest.

Alan Shute says:
22 February 2022

This just look like an ill-thought-out scheme dreamed up during a coffee break after finishing the day’s Wordle challenge.

Which? asks: “But are there any ways to hold cash savings without seeing its value totally eroded by inflation?”

As I believe inflation will now persist for some time and interest rates will rise, it gives me bit of a dilema. Should I make planned high value purchases now by using available cash savings, or should I borrow money at low interest rates to help pay for it? I think the answer to both of these is a qualified yes.

Rather than take out unsecured loans, which still have attactive fixed interest rates until you realise that you will be paying interest for several years to come and probably offset any savings made on pre-inflation prices, I have adopted a different strategy. This is enabling me to make some high value home improvements, that should save energy outgoings in the longer term.

How the plan works.

I opened an interest free credit card to buy some low-U replacement windows in March 2021. As the interest free period is now about to end, I moved the residual balance on that card onto another card with a 0% interest deal and no transfer fee. I’ll just keep paying the minimum payment (which helpfully goes down every month) for the next 12 months, whilst my windows help to save energy. At the end of two years I aim to have paid off around 40% of the original cost of the windws – and with no interest charges. I’ll either use cash to pay off the balance or find another 0% interest deal.

The original card used to buy the windows then came back with a new offer of 21 months’ interest free credit on cash transfers for a fee of 3.4%, which is cheaper than the 2.8% APR on a current loan offer from my bank. I’ll have some of that, thank you! It will pay for the new solar panels I ordered in February. My Which? Trusted Trader told me in conversation they have had to increase all their prices last week, so inflation is already working its “magic”.

I then decided to use an existing credit card transfer offer, also with a modest fee, to overpay my other main credit cards with other banks, which I would normally pay off in full every month. So I now have at least six months to build up my cash savings again, well in advance of the first of the 0% offers when they expire.

Interestingly, the cards that were offering these “sweetheart” deals are now tempting me with further transfer offers of half the 0% interest free period and for almost twice the fee, nearly quadrupling the effective cost of borrowing money this way. So work out your cash flow for the next year and take what you need in one sitting. Don’t graze, thinking you can top up later, especially with bank rates on the rise again.

This scheme is certainly not for everyone

– You need to have a good credit rating to begin with to get these deals.

– Taking out a number of new credit cards in quick succession will decimate your credit score in the short term, but I don’t plan to take out any further loans and it is already recovering.

– You need to have financial discipline to keep track of all the 0% deals and when they expire.

– Only do this for capital goods you would have bought anyway.

– Make sure you have the backup resources to pay off all of your credit card loans at any time. Worst case, I will withdraw some tax-free pension cash to pay off the balances.

– Don’t use your 0% interest credit cards for regular purchases. It complicates how much you should pay off every month, or you could end up paying standard interest rate changes on those items until they are cleared. (The bank should pay off the highest interest portions first, but if the minimum monthly payment is less that the value of your purchases, you will pay interest.)

– Make sure you have a reliable income stream and do not default on the credit card’s minimum monthly payment under any circumstances !!!

– Set up Direct Debits, keep checking they are in operation and that your account will not go into overdraft, which would negate any benefit of the 0% offers. If you actually miss a payment or underpay, the 0% offer ends immediately and you will be trapped into paying the standard monthly interest rate on the credit card until you can clear the balance. You will also have lost any transfer fee you might have paid to secure the deal in the first place. Of course, if the minimum payment was not taken via a Direct Debit and your account was in credit, that is not your fault and any interest should be refunded.

Before the era of ultra-low interest rates and pathetic savings returns, the big financial institutions used to refer to people like me, with no loyalty and always switching for the best deal, as “rate tarts”. Let the games begin!

Why does the latest (25th April) Which? Money newsletter point to the best available savings rates yet seems to ignore Chase Bank offering 1.5% instant access, unlimited withdrawals? Yes you also have to open a current account but there is no requirement to actually use it or have payments going in.