Options For Saving

By Author: Lecia Selbo
Total Articles: 49
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2009''s third quarter saw the average UK household save 8.6% of its income, which was the highest level for any quarter in a decade. Disappointingly however the saving streak didn''t last long. Nationwide''s recent survey found that consumer saving was down in December 2009.

A quarter of people asked admitted that they weren''t putting any money aside as savings during December 2009. This represented a rise of one percentage point on November rates.

Overall the savings index revealed a score of 83, which is four points less than in November and a 12 point fall to 86 on the Importance of Saving Index. So why aren''t people saving?

One answer is probably the ugly level of inflation the UK is currently experiencing. The rate is now at a nine year high of 2.9%, making it more difficult to put money aside as consumers struggle to afford basis goods such as food. Timing is another factor that should explain some of the change. December is a month of spending; Christmas presents need to be bought and parties need to be attended. But it was also the final month to enjoy a VAT rate of 15% instead of the usual 17.5% ...
... and therefore it might have been viewed as an opportune time to make large purchases.

However, the overwhelming factor has to be the unprecedentedly low interest rate. The current level of 0.5% introduced by the Bank of England is designed to get us all spending again to shop ourselves out of recession. This result however has been only slightly increased consumer spending and an excuse not to save. So what are consumers to do?

There are a few options available to consumers however. Unit Trusts are currently one of the best options as they offer good returns with relatively little risk. These investments work by pooling money together which is then controlled by a fund manager. He or she buys shares in a range of different companies and combines them into one fund and then consumers buy ''units'' or shares in these funds. The risk is spread throughout the fund and because it is open ended the number of units rises and falls as investors buy and sell them.

Consumers can choose funds on the level of risk involved to suit their needs and requirements. The value of the units moves in line with the overall value of the fund and thus the value of the underlying share prices.

Legal and General offers six different types of unit trust. They are the largest providers in the UK of Index Tracker and they even offer Cash Unit trusts meaning no exposure to the stock market. Lecia Selbo has had a unit trust with Legal