Money Saving Expert Martin Lewis has issued a crucial warning to millions of Britons using popular 'round-up' savings apps, revealing that these convenient tools could be secretly draining your wealth instead of building it.
In his latest consumer alert, the financial guru exposed the harsh reality behind these seemingly helpful applications that automatically save your spare change from everyday purchases.
The Hidden Cost of Convenience
While these apps promise painless saving, Martin Lewis highlights their devastating flaw: they typically pay little to no interest on your hard-saved cash. "You're getting nothing," he stated bluntly during his ITV show, emphasising that money left stagnant in these accounts loses value daily due to inflation.
This warning comes at a critical time when the Bank of England's base rate has reached 5.25%, meaning legitimate savings accounts are offering returns of up to 5% or more.
How the Savings Scam Works
These apps operate by rounding up your card transactions to the nearest pound and transferring the difference to a separate savings pot. For example, spending £3.50 on coffee triggers a 50p transfer to your savings. While this automated process seems ingenious, the money often sits in accounts earning 0% interest.
Martin Lewis explained the brutal mathematics: "If you've got £1,000 saved at 5%, you get £50 a year. If you've got £1,000 saved at 0%, you get nothing. That £50 is the cost of that round-up."
The Smart Saver's Solution
The solution isn't to abandon saving but to be strategic about where you keep your money. Lewis advises continuing the round-up habit but regularly transferring the accumulated funds to a high-interest savings account.
"Keep doing the round-ups," he recommends, "but once a month, take that money out and put it into a proper savings account where it's actually earning interest."
Top Alternatives for Your Cash
Consumers should look toward accounts offering competitive returns:
- Easy-access savings accounts currently offering up to 5%+
- Regular savings accounts with rates as high as 7%
- Fixed-term bonds for those who can lock away money
- Cash ISAs for tax-free savings up to £20,000 annually
Financial experts echo Lewis's warning, noting that with legitimate savings rates at their highest point in over a decade, there's simply no excuse for leaving money in accounts that pay nothing.
The message is clear: Your round-up savings deserve better. Take five minutes to move your money and watch your spare change actually grow into something substantial.
