Guide to managing your cash in uncertain times
Posted on the 9th August 2016 in SME blog
Whether you’re an individual, a company or a charity, it’s in your best interest to manage your cash as efficiently as possible. The problem is, this can be a frustrating and time consuming task. In our period of economic uncertainty, how can anyone be expected to monitor saving rates, which are constantly changing, across multiple banks, on top of your daily business needs.
In this guest blog our friends at Insignis Asset Management give their advice on managing your cash in uncertain times.
- Keep cash working
Smart savers actively move cash to the best interest rates they can find. Finding a good savings account need not affect your current account and you can open multiple accounts to suit your liquidity requirements in the months and years to come. There are some attractive interest rates for savings, with choice and flexibility in the market place. The trend is generally away from fixed term accounts into notice accounts, so whilst a 1-year fixed term account will yield a good interest rate you may see a 365-day notice account offering a better rate. Banks are beginning to offer a good range of notice accounts to suit any liquidity profile, so you can put money away knowing you have access to it within 30 days, 90 days, 120 days, 180 days, etc. should you need it. And in the meantime you know you’re getting a better rate than a fixed term product.
- Diversify risk
Spreading risk across multiple institutions is prudent during periods of high volatility. The FSCS guarantees depositors savings up to £75,000 per person per institution. Government bonds can provide the security you are looking for – but at a price. For, the first time we recently saw Gilts at negative yields*. To be clear, you have the comfort that the UK Government will send your funds back on maturity, but it could be less than you paid in the first place.
- Capital preservation
We all hear that you may not get back the amount you originally invested and in buoyant times we treat this phrase with contempt. With the FTSE 250 in a 1669 point/14 pct range in the last month alone, timing entry and exit points has challenged even the savviest of investors. In times when the technical backdrop overrides fundamental analysis its worth considering a move to products that provide capital preservation rather than suffer from headline induced volatility
- Fixed rate over variable
Your savings account rate is either fixed or variable. Today interest rates are moving downward so consider fixing a good rate now in order to ride out the reductions in the coming months. Locking in for too long may work against you as rising inflation may result in rising interest rates.
- Do you offset savings against a mortgage?
If you hold a mortgage consider offsetting the amount you hold in savings against the outstanding sum of your mortgage, you would only pay interest on the difference between the two. Some offsets even allow parents to link their savings to their children’s mortgages whilst remaining the beneficial owner of the savings. On the up-side, lowering interest rates are great for mortgage holders.
- Act quickly
Interest rates are on a downward trajectory at present but there are some worth locking in while you can. Insignis can get you up and running within a couple of days and have such good relationships with our partners in our digital banking network that it can be possible to reserve a rate that is due to decrease.
* http://www.yourmoney.com/investing/gilt-yield-turns-negative-first-time
Who are Insignis Asset Management
Insignis Asset Management offers active management of cash deposits so that clients receive improved return on their cash holdings. They deliver bespoke solutions that balance each client’s individual priorities for security, liquidity and return.
For more information, go to www.insignisam.com.
What is active Cash Management? Find out in two minutes here video
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