In his latest market update Derek Sprawling, Paragon Bank's Savings Director, discusses how it is never too early to start planning for 2024 - and how caution can stop savers making the most of currently available interest rates. 

After months of high-inflation and confirmation that the UK economy is in recession, savers started the new year with caution. 

New research conducted by Paragon Bank found that 77% of savers intended to prioritise their savings pots in 2023, with only 9% viewing big-ticket purchases as their priority for the year.

This focus on savings reflects not only the hard times we have been living through, but also savers taking a proactive approach to their finances. Many of the respondents are retirees, so it’s vital that they maximise returns on their cash.

Low interest rates have been a common feature of the economy since the economic downturn of the late 2000s and, for many, they became a fact of life.

All that changed last year with the Bank of England’s Monetary Policy Committee (MPC) ramping up the base rate as it attempted to combat spiralling inflation.

The Bank’s attempts to tackle inflation have, to date, seen little result in terms of lowering prices – but it has though created an environment primed and ready to benefit the saver.

While they may be cautious of big spending in the year ahead, their plans to save also require careful thought.

As the base rate increased, so did the expectation by the markets that the rises would continue, and specialist banks responded accordingly.

With the base currently at 3.5%, and it anticipated to rise further when the MPC meet in early February, specialist banks are currently providing savers with the opportunity to secure fixed rates of 4% and more.

Given these rates available, it is perhaps unsurprising that the Paragon research also finds a strong correlation between the number of those set to prioritise saving in the year ahead and those who cite improved interest rates as a reason why they wish to do so – with 78% naming it as a reason, with an improvement to their salary (18%) and (16%) trailing far behind.

That savers are taking a more proactive approach is a positive step forward. While times are hard for many households, it is vital that they think about their financial future and look beyond the current challenges they face.

While only 9% of savers are set to prioritise big-ticket spending in the year ahead that does not mean than they may not wish to buy a new car, pay for a wedding, or add an extension to their house in 2024.

Delays to big spending decisions may prove a sensible, pragmatic approach to managing personal finances in 2023, but there is a risk for savers if they don’t start planning for 2024.

When it comes to interest rates what goes up may come down. Interest rates will always adapt and change to reflect emerging economic trends, just as they did when they increased throughout last year.

Savers looking at the strong returns they can currently receive from specialist banks should not view them as cast in stone – and the more they delay, the greater the risk that the rate they wish to secure will no longer be available.

As such, it is important for the proactive saver to research the products currently available, look beyond their immediate circumstance and consider their spending objectives for the next few years, and then chose the products that best fit their circumstances.

Caution is a vital part of managing personal finances and knowing when is best to spend is a valuable skill, but an over cautious approach can stop you seeing the returns you deserve.