Guide to Cash Deposits

Whenever you put money into your bank or building society account you are making a cash deposit. You rely solely on interest rates to make your money grow.

Cash deposits are considered to be very low risk investments – after all, your first £50,000 is protected by the Financial Services Compensation Scheme should an FSA-authorised financial institution become bankrupt.

You receive a rate of interest, which can be fixed or variable. The level of interest you receive will depend on a number of factors. You will usually be able to earn a higher rate of interest if you have a large amount to deposit or you don’t require instant access to your money.

Of course, the price you pay for this level of very low risk is the prospect of a pretty modest return on your cash. Cash deposits are one of the lowest performing types of investments.

Also, watch out for the effects of inflation. If the rate of inflation is higher than the rate of interest you are receiving, the ‘real’ value of your money will be reduced.

Providers frequently change their rates, so check you are getting a competitive rate of interest, and, if it’s money you can lock away for a few months, maybe it’s worth having a look at Notice Accounts, where you can’t gain immediate access to your money.