The credit crunch shook up everyone’s perspective of where money is safe. At the time property values plummeted deriding the ‘safe as houses’ myth and since then savings rates have hit rock bottom. So where is your money safe?
Although the government will guarantee £85,000 of savings, the honest answer is nowhere, especially if you consider money that doesn’t earn enough interest to match inflation is effectively losing value and there are many people whose table-topping introductory savings rates have turned to mush and now bring in less than 0.5 per cent of interest.
So where should people invest their cash for an adequate return?
The renowned economist Adam Smith once referred to the UK as a ‘nation of shopkeepers’, a reference to the country’s entrepreneurial spirit and ability to run successful small businesses, while a banking community evolved to service these needs. Somewhere along the line the synergy became distorted and we’ve reached an age where businesses cannot get the help they need from a system that historically grew to support them.
This has coincided with the erosion of savings rates – at the time of writing best buy ISAs are hovering just above three per cent – so there is a clear gap in the market for peers to lend to businesses with rates that are attractive to both parties, and this is where crowdfunding can step in.
Lending money to solvent and profitable businesses with at least two years of accounts at inflation topping rates is a realistic alternative to savings for many investors and it gives wealth creators the capital to grow businesses at a time when the country needs it most.
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