Experts reveal the maximum amount of money you should keep in your bank account
When it comes to saving up, I'm sure most of us were under the impression that the most amount of money they can pile into a bank account, the better.
Apparently, however, this tactic could actually see us losing the value of our cash.
According to a financial analyst, there's a maximum amount of money that should be held in a current account - and anything above that could prove harmful to your long-term goals.
New statistics show that, in the UK alone, around 6.4 million current accounts contain over £10,000. The issue is, however, that these funds aren't earning any interest. That isn't to say that £10,000 is the golden figure, though, as anyone with less than this amount should also be taking heed.
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In fact, if you're someone with anything between £1k and £10k in your current account, experts say you're losing money.
This is because only 0.04 per cent of current accounts are able to take on inflation by earning four per cent or over, whilst the majority do nothing at all, meaning the value of your money steadily declines.
Speaking to Metro, Derek Sprawling - who works as head of money at Spring - advised: "A current account should be seen as a tool for everyday spending, not a place to store large sums of money long-term.
"Think of your current account as your digital wallet – designed for convenience, not storage. You wouldn’t carry £2,500 in cash to the supermarket, so why leave it idle in a current account?"
Sprawling continued: "Treat it as a flow-through space for your money, not a destination."
As such, he believes it best to only keep anything from £500 to £1,000 in your current account, to cover things like bills and act as a buffer for any unexpected expenses.
"Anything beyond that could be working harder for you elsewhere," he continued. "With interest rates on many current accounts sitting well below inflation, excess funds are losing value in real terms."
If you're still not quite getting what he's saying, worry not. It took me a hot minute, too.
Basically, if you're holding £10,000 in a current account with no interest right now, given that inflation is currently at 3.8 per cent, in 12 months time, you'd have lost £380,000 in monetary value, simply due to how expensive everything has become.
"That’s the hidden cost of inaction," Sprawling added. "If your money isn’t earning at least the rate of inflation, it’s effectively shrinking.
"Switching to accounts offering higher returns is key to preserving purchasing power."
This isn't to say, however, that customers should just jump at the first interest savings account they can find. It's best to shop around to figure out the best rate for you.
"If you want an account that enables you to access your funds within minutes, not days, do your research and check the Terms and Conditions of different accounts," the financial expert explained. "Not all 'easy access' is as easy as you might presume."
Topics: Advice, Cost of Living, Life, Money, Real Life, UK News
Rhianna Benson