Retaining and building your wealth.
As with all the information provided on Remembergold.com, this is not financial advice, you should always do your own research before investing, choosing somewhere to hold your savings, or making any financial decisions.
Everyone’s financial situation and risk outlook is different, our age, family, knowledge of various investment and savings vehicles vary, there is no ‘one size fits all’ solution. With this in mind, you should think about how you want to allocate your savings based on your own circumstances.
- Long term: Savings you don’t need to access for many years. For example, savings you want to have in retirement or to pass down after you’ve gone.
- Medium term: Savings you don’t need right now but want to be able to access them reasonably quickly in case of emergency.
- Short term: Accessible/spendable at any point, almost instantly.
Within these saving terms, there are also differing risk vs rewards to think about. The risk vs reward based on the categories below, is generally thought of as, Bank accounts being the lowest risk and Cryptocurrency being the highest risk. But this also depends on your own personal risk outlook and your knowledge of each category. Although banks accounts are generally classed as the lowest risk, I personally see them as the highest risk.
Below are some examples, starting with what is considered the least risky through to higher risk options.
Savings in a bank (Try our calculator)
The most common way people save is to simply put their money into a bank account and leave it there, this is taught to us at school so it’s obviously the most widely used method, mainly because people are taught to trust the banks and they do so without question.
The downside risk, savings in a bank account are potentially the most at risk of all when you consider the guaranteed loss of your purchasing power due to the extremely low interest rates, that do not keep up with the rate of inflation, therefore your savings are continually worth less the longer to keep them in the bank account even though you see your (nominal) balance increasing, you also have the risk of bank failure and bank bail-in.
Savings in Gold
Not so common, as we are not taught about gold, money, and currency in school, for reasons previously covered on the site. Gold as a savings pot is, and has been proven historically, to be one of the safest means of storing wealth long term. Although the price does fluctuate compared to fiat currency, over the long term, Gold protects your savings and retains your purchasing power. (Read, What has Government done to our Money)
Physical Gold:
Held in your possession, owned by you. No counterparty risk. UK Britannia and Sovereign are capital gains tax free. Untraceable, so easily gifted or passed down to your children. Holds wealth for generations which is why banks, countries and rich people own it. Can take a few days to liquidate if you want to convert to currency, to spend.
Digital Gold accounts (see here)
Allocated Gold owned by you, slight counterparty risk. Subject to capital gains tax (depending on your financial situation, check with your accountant) Accounts are set up using the same KYC, AML regulations as a bank account, so it is traceable and depending on the amount, could be subject to inheritance tax. Small monthly charge for storage and insurance. Holds wealth long term, can be spent instantly using debit card (depending on account type) or liquidated and transferred bank to your bank account almost instantly.
Cryptocurrency (Bitcoin, Ether)
Depending on who you listen to, cryptocurrency can be seen as extremely high risk due to its volatility and short history, or it can be seen as low risk due to it being considered the future of money and the fact it is being adopted and integrated into many of the biggest corporations on the planet. It has become part of the financial world, but this is largely unknown to the majority of people due to the lack of mainstream news coverage. Cryptocurrency is portrayed to the general public as dangerous, highly risky, unregulated, used only by drug dealers and money launderers. When in reality, although high risk, it is regulated, taxed, used by and held by the richest companies and individuals in the world.
Some quick comparisons to consider.
Gold
Physical Gold: 1oz Britannia or Gold Sovereign, or held in an allocated digital account for ease of use. There’s a small monthly charge for storage and insurance.
Gold Price History: % change
30 days +1.21%
6 months +6.62%
1 year -10.44%
5 years +32.70%
20 years +605%
It’s impossible to predict the future prices of gold, same as it’s impossible to predict future inflation rates or interest rates etc. but based on historical figures.
£50,000.00 held in gold over the last 5 years would now have the purchasing power of approx. £66,350.00
Premium bonds
Many websites give info on this, for example https://www.moneysavingexpert.com/savings/premium-bonds-calculator/#result
Based on £50,000 over 5 years, with average luck you would expect to win roughly £1500. This is 3% or 0.6% per year. This doesn’t account for inflation which is destroying the purchasing power of your £50,000.
Assuming an official 2.5% inflation rate (much higher in reality), after 5 years your £50,000.00 would have the purchasing power of approx. £45,185.00.
Although you will have your winnings on top of that, you could win far more, or less, it is safe and a bit of fun too.
Bank account (See Gold equivalent compound interest rates)
Average standard bank account interest rate 0.01%
Assuming an official 2.5% inflation rate (much higher in reality), Your inflation adjusted interest rate is -2.49%
After 5 years your £50,000 would have the purchasing power of approx. £44,077.38
Cryptocurrency (Ether, Bitcoin)
It’s impossible to predict future prices of Cryptocurrency and in theory they could all become worthless, as could any company shares on the stock market, although it’s highly unlikely now and becoming more unlikely in the future due to financial institutions like banks, pension funds, investment companies, companies like Facebook, PayPal, Amazon, Visa, Mastercard, Ebay, Microsoft, Tesla to name a few, are all investing billions in to digital payment systems and blockchain.
Based on historical figures.
£50,000.00 invested in Bitcoin 5 years ago would now be worth approx. £4,190,000.00 (£4 million, 190 thousand)
£50,000.00 invested in Ethereum 5 years ago would now be worth approx. £6,665,000.00 (£6 million, 665 thousand)
We’re not likely to see cryptocurrency increases like that in the next 5 years, (or maybe we will?) but with the continual printing of new currency by all central banks, to lend to governments who spend and waste it, and then charge the tax payer and saver through inflation, it might be worth having your savings in cryptocurrency, gold, silver, and any other asset that can’t be inflated (printed) by banks, which devalues and destroys your wealth.
Throughout our lives we are advised to put our savings into bank accounts, pension funds, Tax free shelters and all manner of Fiat currency denominated financial vehicles. As banks continue to create new currency through debt, via quantitative easing, stimulus, packages, help to buy schemes, loans, buy now pay later, vehicle leasing, credit cards and any other financial product where some form of loan, debt, borrowing or lending is involved, then any savings you hold in that system will be continually devalued, as it has been for the last 50 years.