Despite savings accounts paying pitiful returns, savers are still worried about investing in the stock market, according to new research from Scottish Friendly.
The survey of 2,000 people conducted by the mutual investment company suggests that Brits are suffering from what it calls a chronic case of ‘investophobia’.
The survey found that 66% of savers in the survey were aware that interest rates were below current rates of inflation. Nonetheless that was not enough to encourage them to dip their toes into the stock market.
Currently inflation stands at 2.44% (CPI), however Scottish Friendly cites that the best easy-access account pays just 1.33% (Post Office Online Saver).
More than half (53%) also said that they would not invest in the stock market in the full knowledge that inflation would reduce the value of their money in real terms. This seems ironic given that almost half (49%) said they would not invest because they were worried about losing money.
The survey also found that 39% are happier keeping their savings in cash and 29% do that because “it is what they have always done”. More than a quarter (28%) said financial products were too complicated, while 25% believed they didn’t have enough money to invest in a Stocks and Shares Isa.
Calum Bennie, Scottish Friendly’s savings specialist, says:“By holding savings exclusively in cash at the moment many British savers are effectively letting their money diminish. Every pound that they save becomes less valuable while held in an account that delivers returns below the rate of inflation. Worryingly, our findings suggest the savings and investment decisions of so many Brits are being driven by a nagging fear of losing money and this ‘investophobia’ may be clouding personal judgement when it comes to important financial decisions.”
He adds: “Investing doesn’t have to be scary, or complicated, or only for the wealthy; it’s for everyone. It is a tool that is readily available to all that could help empower financial well-being and could be well worth considering at the very least. Don’t let fear stop you from considering ways that could make your money work harder.”