Is saving worth it?

It’s tempting to think that it’s not worth saving money because rates are so pathetic at the moment. In fact, we’ve had five years of historically low interest rates. It’s hardly an incentive to squirrel your hard-earned cash away.

The problem is that the Bank of England base rate dropped to an all-time low of 0.5 per cent in 2009 and has remained there ever since. As the interest on savings is closely linked to this rate, it means they have also hit rock bottom.

Is there any chance that rates will go up?

Er, not really. It looks like the central interest rate will stay the same until 2016 after the new Bank of England governor said it would not be increased until UK unemployment falls below 7%. When you consider that the base rate was 5% in July 2008, 0.5% seems incredibly low.

What has years of rubbish interest rates meant for ordinary savers?

It hasn’t been good news. In August 2012 savers could have earned 3.19% on an instant access savings account. Today, one of the best rates is just 1.55%.

And fixed rates have been affected too. At the beginning of 2013 savers could have plumped for a 3.5% rate for a savings plan with a fixed rate of interest for one year. Now one of the best 12-month fixed rate products is just 1.9%.

This is all a bit depressing. What are my options?

If you want to save money, even if you only have a small amount to put aside every month, the main thing is to put every penny where it earns the most interest. There’s little point letting your hard-earned cash sit in a savings account with a meagre interest rate. You’ve got to make your money work for you.

If an account with a higher rate catches your eye, remember that it will probably have restrictions on it. You might not be allowed to access your money for some time. Or there could be a strict minimum deposit that may be out of your reach.

That said, something like a regular savings account might be right up your street. Or perhaps an Individual Savings Account (ISA). In a nutshell, a cash Isa is just a savings account with one big bonus: the taxman can’t get his hands on your interest.