With the economy being unpredictable, and Bank of England base rates being so low, investing money in savings accounts, is a rocky area for many people. However, investing money in Fixed Rate Bonds is actually an ideal opportunity for anyone who is looking for long-term benefits out of their investments, rather than a “quick-fix”.

The appeal of having access to your cash quickly is overwhelming for most people, who don’t necessarily know when they might need that money. However, with quick access to your savings comes low interest rates, which of course means that you won’t see a very profitable return for your cash. Therefore, in the short-term investing money in saving accounts and ISAs can prove to be particularly frustrating, especially when interest rates are so low and unpredictable.

If you really want to reap the rewards, it is beneficial to think long-term. However, don’t expect to see your cash anytime soon. Nevertheless, despite the unease of not being able to touch your money, you have to admit that it is very appealing to know that the rate of interest that your money will attract will be much higher, and most importantly it will be consistently higher, as these rates will remain unchanged for a certain period of time. This means that even if the Bank of England reduces the interest rates even further, the amount of interest that you accumulate on your savings will not decrease with it.

For an example, imagine that you have chosen to invest £20,000 into two very different savings accounts. The first £10,000 will be invested, for two years, into an instant access savings account that will pay 2.7%. You can take the money out whenever you choose or need to, and assuming that the rates don’t go up or down, which they more than likely will, you may receive just over £270 in interest. This of course assumes that you can fight the temptation to take the money out should you need it.

Also remember that if you do withdraw money from your savings, even if you replace it fairly quickly, you are still going to lose money, as interest is paid on a daily basis, so you will lose interest on those days when your account holds less money.

Your second £10,000 is invested, again for a period of two years, into a fixed rate bond that will pay a guaranteed 5.3% on your money. For the entire period of two years, you can not touch a penny of your money, which for many can seem frustrating. However, after just one year, you are looking at a payment of just over £530 in interest. Already, your bond is bringing you a potential of £260 more than your instant access account.

The only way to possibly claw back that £260 from your instant access account, to even the amount of interest out, is if the interest rates increase dramatically, which as we are all incredibly aware, seems very unlikely to happen anytime soon.

Once you’ve decided to open a fixed-rate bond, it is advisable to choose a bond scheme that is regulated by the Financial Services Compensation Scheme (FSCS), as the scheme offers you extra protection should something unexpectedly happen to your financial provider.

We’ve all seen the stories in the media about financial service companies falling apart, or needing to be “bailed out”, and it typically falls on the Investors and Savers (ie people like you) to bear the full brunt of these problems. However, the FSCS was set up and designed especially for people like you. Its aim is to ultimately offer you compensation should your financial provider let you down. This would probably mean that they can not afford to pay you what they owe you, perhaps because that business has ceased trading, or it has insufficient assets available to pay you the money.

The scheme is meant as an absolute last resort, but that extra protection is comforting nonetheless.

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