Confusion Over Effect of Tax and Inflation on Savings
24/07/2008
Research from National Savings and Investments (NS&I) implies that UK residents are not clued up about the effects of inflation and tax on their savings accounts.
Even though the credit crunch is discussed in the media on a daily basis, people aren't aware of the implications of economic turmoil for their savings accounts.
Almost a third of respondents said they weren't aware of how inflation impacted their savings accounts, and 10% admitted they didn't even know what inflation was. Over 25% of respondents said they didn't know what effect tax has on savings.
"It is concerning that many people don't understand what inflation is, or how it might affect decisions about saving or spending money." said John Prout, sales director at NS&I. "Inflation means that prices increase over time, so £100 today will buy you a little bit less in a year's time. It can be caused by increases in salaries, increased demand for items or a decrease in supply which all push prices up.
"People are more likely to think about how inflation affects the price of their shopping basket, but not how it affects the value of their savings. The RPI is one of the measures of inflation and with it averaging 3.98% last year if we don't put our savings in a tax free account matching or a non tax free account beating this rate then our money will be worth less in the future."
Even though the credit crunch is discussed in the media on a daily basis, people aren't aware of the implications of economic turmoil for their savings accounts.
Almost a third of respondents said they weren't aware of how inflation impacted their savings accounts, and 10% admitted they didn't even know what inflation was. Over 25% of respondents said they didn't know what effect tax has on savings.
"It is concerning that many people don't understand what inflation is, or how it might affect decisions about saving or spending money." said John Prout, sales director at NS&I. "Inflation means that prices increase over time, so £100 today will buy you a little bit less in a year's time. It can be caused by increases in salaries, increased demand for items or a decrease in supply which all push prices up.
"People are more likely to think about how inflation affects the price of their shopping basket, but not how it affects the value of their savings. The RPI is one of the measures of inflation and with it averaging 3.98% last year if we don't put our savings in a tax free account matching or a non tax free account beating this rate then our money will be worth less in the future."
