Since the Marcus by Goldman Sachs savings account burst onto the scene a little over a year ago, it has been very popular with UK savers. Offering an interest rate of a market-leading 1.5% AER when it first launched, it was a sensible choice for savers looking for somewhere to park their cash in the short term.
However, you may recall that the 1.5% interest rate that was originally offered by Marcus actually consisted of two components – there was the standard interest rate of 1.35% and then there was the ‘bonus’ interest rate of 0.15% for the first 12 months. Unfortunately, for those savers who opened an account when it first launched, that 0.15% bonus rate has now expired. But don’t despair – there is a way to boost the interest rate on your Marcus account again.
Renew your bonus interest rate
The good news is that it’s possible to renew your bonus interest rate, although it is now only 0.1% instead of 0.15%.
To do this, all you need to do is login to your Marcus account and select ‘View’ and then ‘Review your savings.’ Then, click on ‘Renew your bonus.’ That’s it! This simple strategy will boost your interest rate back up to 1.45%, which is one of the better interest rates on the market right now.
The truth about 1.45%
Be aware, though, that while an interest rate of 1.45% may be attractive in relation to the interest rates offered by other savings accounts, it’s still an abysmal rate of return. UK inflation has averaged around 1.97% over the last six months, meaning that any money that is only earning 1.45% in a savings account is actually losing purchasing power over time.
Cash savings are useful for short-term goals and emergency cash, of course. But keeping the bulk of your wealth in a cash savings account earning a little over 1% over the long term really isn’t a sensible idea. Your money is likely to lose value in real terms.
Aim for higher returns
If you’re serious about building your wealth, it could be a good idea to put some of your money into growth assets such as shares and investment funds. These assets are higher risk than cash savings (it’s possible to lose money) but the rewards can be far greater, meaning they can really help you boost your savings, and beat inflation, over time.
Here’s a great example: when I wrote about the Marcus savings account this time last year, I suggested that those looking to build their wealth might also want to consider investing in the Lindell Train Global Equity fund in a Stocks & Shares ISA. Fast forward to today, and that particular fund has returned around 14% over the last year – nearly 10 times the return from a Marcus account.
Keeping a little bit of cash in a savings account is always smart. You never know when you’ll need it. However, the bottom line is that for long-term wealth building, growth assets are a far more sensible choice.
Edward Sheldon has a position in the Lindsell Train Global Equity fund. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.