Hacker News Reader

Comment by elcct | Hacker News Reader

3% minus inflation of 0.6% that would be 2.4% of £3000, which is £72 a year, which gives £6 a month. Is it worth the hassle?

View on HN

I don't understand why you're subtracting inflation. Yes I know doing so gives you the 'real terms' increase in value, but if you stuff £3,000 in a mattress and pull it out after a year you don't notionally add inflation to it's value when comparing it to the value of savings. The savings in that account would still be 3% more than your mattress money, not 2.4% more. Unless you're comparing it to spending all the money right now.

Anyway, £6 (or £7.50) is the price of a meal. £72 (or £90) is the price of a few decent Christmas presents. These things add up.

He's probably subtracting inflation to make the interest rate of Tesco relative to the rest of the economy. Stuffing money in a mattress is a pretty poor idea when it should be very easy to find an investment scheme that covers inflation.

It's not like the rest of the economy is immune from inflation though. Do we adjust everything for inflation? It just strikes me as pointless complication. Really, the only point I can think of is comparing saving to outright immediate spending.

Certain statistics are usually inflation adjusted, like GDP. Real Gross Domestic Product measures economic output adjusted for inflation or deflation. If inflation is 20%, and you're earning 3% interest, your losing purchasing power. If inflation is 1% and you're earning 3%, you're gaining.

Real, not nominal, returns are what people care about.

> If inflation is 20%, and you're earning 3% interest, your losing purchasing power.

Yes but I think the point the person you're replying to is trying to make is that it doesn't matter because the inflation rate is not dependent on where you put your money.

Shouldn't the comparison be to the interest rates and risk with comparable places to put/invest your money? I suppose if inflation were extremely high or low compared to interest rates then it would affect your appetite for risk vs interest rate, but I don't think that's the case here.

You need to consider real returns only if the inflation rate varies between things you're looking at, i.e., across countries or time.

When you're storing small sums of money (less than 10k €/$), the amount you lose from inflation from stuffing money in a mattress over a year is negligible.

But investing in 'the economy' generally means investing in the stock market. Which introduces risk, which isn't great for an emergency fund - and you'll no longer be covered by FSCS.

There aren’t many other options when it comes to low risk, short term money storage. Certainly beats any cash ISA rate atm (some of which are actually below inflation).

There’s a website[0] dedicated to helping with this style of saving, so I think it’s a fairly popular thing with people who don’t want to leave money on the table.

[0]https://www.bankaccountsavings.co.uk

What hassle? If you need a current account, open a Tesco one, and you're getting free money.

(If you opening multiple ones, and juggling money between them or whatever, you're probably just the sort of person who gets a kick out of doing this sort of thing, and so the exact figure is beside the point...)

£72 in a year for about 15 minutes of effort sounds worth it to me. (Apply online and transfer money to the account online.)

because a lot of accounts provide an interest rate that's below inflation

Think of it as a savings account and it's fairly competitive in the current climate. No monthly pay-in required, no direct debits etc. required, just 3% interest no questions asked.

With Brexit uncertainty the current GBP inflation is over 20%. 3% is a drop in an ocean on that.

The UK doesn't import everything.

Whether you like it or not the USD is the world peg right now and a currencies worth in USD is its true measure of inflation. What the national bank prints is negligible in comparison.

They seem to be in full self denial mode right now.

I'd suggest using international drawing rights, a basket of currencies that mean fluctuations in the dollar are evened out

No, but quite a lot.

"Overseas Trade Statistics. In July 2016 the value of exports (EU and Non-EU) decreased to £23.9 billion, and imports (EU and Non-EU) decreased to £39.7 billion, compared with last month. Consequently the UK is a net importer this month, with imports exceeding exports by £15.9 billion."

https://www.uktradeinfo.com/Statistics/OverseasTradeStatisti...

So, (brits), why did you downvote this without commenting?

(It went from +3 to 0.)

I would guess because the UK economy is worth ~£2tn. £150bn of imports raising at 20% isn't a huge impact (around 1-2% - not a huge deal in the grand schemes of things).

PS: I didn't downvote you.

That's because of the London banking. Which is now moving th Frankfurt.

fat chance, some back office operations will move (as little as possible), and the lucrative front office work will remain in London as that's where the clients are

60% of food and petrol (gas) is priced in dollars

If the UK is in as much trouble as the naysayers seem to think, that 3% counts for more than ever, since cash will be tight.

Reply on news.ycombinator.com