Money Worries: How safe are your savings, really?

From deposit protection to the scourge of inflation, how safe your savings really are

The recent economic turmoil has brought the importance of financial security to the forefront, but do you know how safe your savings really are?

Putting your cash into a savings account provided by a bank, building society or credit union may seem like a fool proof method of protecting your money, but there can still be risks involved. Knowing the risks associated with the regular easy access savings accounts, and the protection in place should things go wrong is information worth knowing.

If your bank goes bust

Do you know what would happen to your cash if your bank, building society or credit union went bust? Though it may be a very unlikely occurrence, events of the past half-decade have demonstrated that it is possible for this to happen, and it may be worth protecting yourself in any event.

The Deposit Protection Scheme

The Deposit Protection Scheme (DPS) is run by the Financial Services Compensation Scheme (FSCS), a not-for-profit independent body set up in 2001.

  • Every UK regulated financial institution is protected for up to £85,000 of deposits per person under the DPS. This means that you will be usually be compensated for any losses of up to £85,000 within the limits of the scheme should that institution go bust.
  • Accounts protected will include those offered by banks, building societies and credit unions, provided that they are regulated by the Financial Services Authority in the UK.
  • The compensation scheme applies per person per financial institution. This means that if you hold an account with two separate institutions, they will be covered for up to £85,000 in compensation each. So if you hold more than £85,000 in savings it can be a good idea to spread the amount across separate institutions with the aim of achieving full protection.
  • It's important to recognise that a financial institution is not the same as a bank, and many high street banks are run under the same umbrella.
  • If you have a joint account with a partner or spouse you will both be covered individually, so funds held jointly in such an account would in theory be covered up to £170,000.


Inflation is the measure of a unit of currency against the rising cost of living. Over time, for example, the real value of what you can purchase with a pound coin will diminish, as the cost of goods rises. What does inflation have to do with your savings though?

If your savings are sitting in an account where the interest does not keep up with inflation then your cash could be falling in real value. If the cost of goods goes up and your cash retains the same in monetary value its spending power will diminish. Inflation can eat into the real value of your money, meaning your money could be at risk. For this reason, it's a good idea to shop around to get the best possible interest rate that you can, while still retaining the level of access and risk rating that you desire.

If you are unsure about finding the right savings option for your needs, you may want to speak to an independent financial advisor who can help guide you through your options.

In tough economic times, building up and maintaining a savings buffer becomes ever more important- after all, savings can provide a lifeline should you lose your income or happen upon an unexpected expense. Know your savings and the risks and protections afforded them and you could see yourself on the way to a more secure financial future.

John Hughes writes for, a UK based site that provides access to financial advisors as well as to debt advice charities for those struggling with their debts.

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All content is for informational purposes only and is the opinion of the author. Nothing on this website should be interpreted as "advice". Money Dashboard Ltd make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use.

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