In The Face Of Inflation, The UK Needs To Take An Innovative Approach To Our Savings

Economists are warning that inflation could hit double digits in the UK in late 2022, with rates already on the rise. The Bank of England recently announced that inflation is expected to be several points higher than the predicted 7.5%, a significant increase from the existing steep levels of 5.5%.

One of the areas which will be impacted by this rise is personal savings. Already hit by historically low interest rates (in January 2022, interest rates were 0.25%, the lowest since the Bank of England formed the base rate in 1694 ), the money people have put away is set to decrease in ‘real’ value as the gap between low interest rates and the rate of inflation increases. As a result, there is no longer any significant reward associated with leaving money stagnant in a savings account.

This means that if people seek to retain the value of their money in the bank, they are going to need to be more proactive.

This is where trading can begin to play a key role in the lives of everyday people in the UK. No longer confined to the hectic floors of Wall Street or The City, we have entered a golden era of consumer trading. Numerous platforms are now available which allow amateur or ‘retail’ traders to maximise the potential profit from the buying and selling of stocks and commodities, using just their phones or laptops.

The advantages held by institutional traders over retail traders are lessening. Trading platforms that facilitate activity for retail traders are becoming increasingly sophisticated, with options such as more diverse securities and available real-time data now commonplace features.

An understanding of the potential associated with investing has become increasingly widespread in recent years. The number of people in Britain who are investing their money has surged, and the latest available figures report that in 2020, 33% of people owned shares, an increase from only 22% who said that they owned shares in 2018 . This figure is likely to increase, with over two thirds of people (67%) stating that they intend to invest in the future.

The returns However, reaching a stage where people feel confident enough to engage in trading can feel like an understandably overwhelming task for the average person in the UK. Studies have shown that only 66% of British adults are considered financially literate with regard to their savings, with even fewer (56%) considered financially literate when it comes to their investment knowledge.

There are plenty of steps that people can take to improve their understanding of the core aspects of financial literacy such as saving, investing and debt management. For example, there are a wealth of free podcasts available to assist in the development of financial understanding; ‘Money Girl’, hosted by Laura D Adams, has millions of downloads with the 10-minute episodes full of advice and tips that listeners can put into practise immediately.

Other practical steps that can be taken include building up confidence by trading small amounts or increasing exposure to financial practise by setting up a small business related to a personal passion.

It has never been easier to access the information required to deepen an understanding of financial literacy.

But this doesn’t mean the responsibility of finding the right educational tools should be on the consumer; responsibility must also lie with trading platforms to ensure their customers are well informed and given the information they need.

Indeed, guiding users through the process and minimising risk will become an ever-more important function of trading apps if they are to be successful at attracting wider audiences.

Informed customers are long term customers and good financial knowledge increases an individuals chance of success. This positions trading platforms in a unique way, and provides an opportunity to expand and increase the financial knowledge in society and simultaneously improve outcomes for their customers.

The strength of these important educational and guidance features on Capital.com is something we pride ourselves on. The latest Investment Trends Report found that Capital.com achieved the h ighest overall client satisfaction levels among leverage trading providers in the UK for education materials and programmes, as well as in the categories for mobile app and overall satisfaction. We also ensure comprehensive, step by step guidance is available via our Investmate app, which offers reliable finance education on the go.

These kind of comprehensive educational tools and accessible, customer-centric platforms can demystify the experience of trading and can result into real financial benefits for people in the UK. As the cost of living rises along with inflation, this will become more important than ever.

Trading may not be for everyone, as with higher reward does come higher risk. However, providing the knowledge and tools available to explore the potential benefits of trading on our personal finances can facilitate financial freedom. This is a powerful tool and the more people who can reap the beneficial rewards, the more pro-active steps can be taken to protect personal savings.