5.2.5 Savings accounts – the risks
In this video Simon Katte of the government’s Money Advice Service (MAS) talks about the risks arising from savings and investments.
Download this video clip.Video player: ou_futurelearn_money_vid_1014.mp4
The risks associated with savings as opposed to other forms of savings and investments... of course there are risks. It is generally one of the safest forms of putting your money aside, but it does come with certain risks attached to it. The main one is around the return that you might get on the interest that you're receiving off the savings. And of course, the impact that that has in relation to inflation. So of course, if your savings rate isn't getting the same level as inflation or, or certainly above it, the value of your money over a set period of time is in fact likely to be going down. So there is a real risk in terms of inflation and the rate of interest.
Because of course, interest rates do vary, they're not always set at a certain level. They do go up and of course they do go down as well.
The other risk associated with savings is of course the security of the money that we've got put aside in terms of the safety of the institution that we're banking with, for example.
We've seen in the past institutions such as banks, building societies, can get into difficulty. But in respect of that, there are protection schemes in place to deal with that scenario. So should a bank or building society ever get into financial difficulty there are protection schemes in place, in place, through the regulators, to deal with that particular scenario.
We have also seen of course, in the past, Government has stepped in to protect the amount of savings that are put aside. But again, we can't always rely on that going forward.
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