What caught my eye this week.

A lot of people daydream about what they’d buy if they won the lottery. This chance to fantasize is probably the most tangible benefit of a lottery ticket.

Not me, though.

I appreciate this is almost-too on-brand – but I daydream about how I’d invest it.

I’ve told friends and family they wouldn’t even know if I won the lottery. I’d simply scale up my investing, and maybe slack off the little paid work I still do.

Eventually they’d see me spending more – hopefully on experiences we can share, as much as mere ‘stuff’. But nobody would know it wasn’t just from my portfolio finally paying off.

Nope, as a closet/Bohemian investor for decades, a run-of-the-mill lottery jackpot (low seven-figures say) would first just make for some chunky extra entries in my return-tracking spreadsheet.

In it to win it

Perhaps you think this is desperately sad?

Fair enough. But do consider the surprisingly terrible track record of lottery wins ruining lives.

Against that danger, I believe my strategy of turbo-charging my existing way of life with an extra million or two – rather than racing to build a hot tub on my shed or to buy a pet tiger – has psychological merits as well as financial ones.

Indeed, you should be careful what you do if you receive a windfall of any size.

That’s because a significant lump sum has the potential to compound meaningfully for the rest of your life – with all that possibility for more freedom and independence – while at the same time a big windfall can easily implode your current cozy way of life like a fiery meteor landing in your living room. Upsetting all your arrangements and generally freaking you out!

Anyone who gets a big lump sum out of the blue has had one of life’s luckiest financial breaks.

But it can cause – and may come with – mental issues that need to be worked through, from guilt at sudden wealth, to sadness about where the money came from (the death of a parent or spouse, for instance).

It could be you

For these reasons, Advisor Perspectives this week also urged doing nothing fast if you’re fortunate enough to get a windfall:

Whatever the situation, I always tell clients who receive a windfall to do nothing for an entire week. Absolutely nothing. They must give themselves time for the reality of their new circumstances to settle in.

That’s because windfalls are usually the result of something that has happened. And that, in turn, can trigger our emotions.

Stepping away from the fray and doing nothing is underrated in many areas of investing. This is another one.

Now you might think that as a regular Monevator reader you’d be a rational Vulcan if a life-changing lump of dough was suddenly bunged into your financial oven.

And perhaps you would be, long-term.

But in the short-term we’re emotional creatures. Which can make you temporarily crazy. And once you go the wrong way, things can escalate.

So let’s have some fun…what would you do if you won a million pounds?

Buy a boat? Abandon a life of frugality and speed past the Jones’s? Start betting on risky growth stocks to aim for ten million? Spread the lot across a dozen (FSCS-protected!) bank accounts to ensure you were set for life, at least if you ignore inflation?

Share your fantasies in the comments below. And have a great weekend.

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Cash savings rates have been dreadful over the past few years, with many accounts offering rates as low as 0.01% AER. (That’s equivalent to 1p per year for every £100 saved. Don’t spend it all at once!)

This low-interest environment has punished many with a frugal mindset, but most obviously those who’ve kept a large proportion of their hard-earned wealth in a cash savings account.

However, while accounts boasting pitiful rates still abound, the savings market is – finally – starting to turn, thanks to the Bank of England raising its base rate in the face of high inflation.

The Bank Rate has already risen three times this year. It currently stands at 1%. And it’s expected to go higher, which should lead to further competition among the banks for savers.

So where should you stash your cash today? Let’s look at the different types of accounts out there, and at which accounts pay the highest rates of interest.

Easy access savings

Easy access is the most popular type of savings account. These accounts pay you interest and give you instant access to your cash. This means you can add or withdraw money as often as you like.

Easy access is typically the best type of account to go for if you know you’ll need access to your cash within a year or so.

They’re also a good option if, like me, you just don’t want to lock away your cash.

Do note that interest rates on easy access accounts are typically variable, meaning they can change in future. However some easy access accounts will pay a temporary fixed bonus for a year.

Picking the ‘best’ easy access account is tricky. That’s because there are a number of accounts out there that all work slightly differently from one another. What’s more, the highest rates are only available if you’re willing to open a new bank account.

Here’s the lowdown.

• Highest easy access rates (but you’ll need to open a current account). If you’re willing to open a bank account, then Virgin Money currently offers the highest easy access savings rate. To get it, you must open its ‘M’ Plus current account and then manually open its linked savings account. Virgin’s savings account offers 1.56% AER variable interest, payable up to £25,000.

• If Virgin isn’t for you, then app-only Chase Bank pays a slightly lower 1.5% AER variable via its linked savings account. You can save up to £250,000 in this account, though you should probably always limit yourself to the £85,000 Financial Services Compensation Scheme limit.

• Highest straightforward easy access rate. If you’d rather avoid having to open a new bank account or deal with temporary bonus rates, Ford Money pays the highest, straightforward easy access rate available. Its Flexible Saver pays 1.3% AER variable interest. You can save as little as £1.

Regular savings

Regular savings accounts enable you to put money into them on a monthly basis. Usually the headline rates on these accounts trump easy access deals, but there are limits as to how much you can save into them each month. Those limits are often quite stingy too!

Some accounts only allow you to hold them for a year or so. Others restrict your ability to withdraw cash. And the highest-paying accounts are often tied to you also running a specific current account. However there are a few decent options available open to all.

Here are a few of the top accounts:

• Highest regular savings rate for current account customers. If you have a First Direct current account then you’ll have access to its table-topping regular savings account. It pays 3.5% AER fixed interest for one year and you can put in up to £300 per month. However, if you close the account within a year, the interest rate drops to just 0.1%.

• Don’t have a First Direct account? NatWest (3.3%), Santander (2.5%) and Nationwide (2.5%) also offer competitive regular savings accounts for their current account customers.

• Highest open-to-all account. Coventry Building Society offers a competitive regular savings account paying 1.65% AER variable interest for one year. Plus, you don’t have to be a Coventry customer to open it. You can save up to £500 per month, though if you want to close the account early, a 30-day interest penalty applies.

Notice savings

Notice savings accounts are just like easy access accounts, but with an added rule that you must give your provider notice before making a withdrawal.

Generally, the longer the notice period, the higher the interest rate.

I like notice accounts. They provide a way of beating easy access rates without the requirement to lock away cash for a long period of time.

Here’s my pick of the top accounts:

• Highest 120-day notice account. If you’re happy to give roughly four months notice before withdrawing cash, DF Capital’s 120-day notice account pays 1.7% AER variable interest.

• Highest 90-day notice account. If you’d prefer a shorter notice period, then DF Capital also has a 90-day notice account paying a slightly lower 1.6% AER variable.

Both accounts enable you to save from £1,000.

Fixed savings

To get yourself the highest interest rate on your cash, fixed savings accounts are the way to go.

With these accounts you must lock away cash for a set period of time. In return, you’ll earn a higher interest rate than the easy access alternatives.

Generally, the longer the fixed period, the higher the rate of interest.

However while I think fixed savings accounts can work for some, I tend to to steer clear. Rightly or wrongly, I value being able to access my savings whenever I want, so I prefer easy access offerings.

In contrast, those who most value a guaranteed interest rate will find what they need here.

With fixed rate accounts it’s really important to appreciate the risks of opting for an account with a long fixed period. If savings rates rise in future, you won’t be able to benefit until your term expires.

Here are the longest one- and thee-year fixed accounts available right now.

• Highest one-year fixed savings account. Cynergy Bank offers a one-year fixed savings account paying 2.57% AER fixed. You must have at least £10,000 to open it.

• If you’ve less than £10,000 to save, then Investec pays 2.4% AER fixed for one year. You can save from £5,000.

• Highest three-year fixed account. Cynergy Bank pays the highest three-year fixed account at 2.9% AER. You need £10,000 to open it.

Is opening a savings account a good idea with high inflation?

It’s hard to ignore inflation right now. Latest Government figures tell us that the Consumer Price Index stands at 9%. Many expect it to go higher this year.

While there’s no sure way to hedge against inflation, we know for sure that none of the savings accounts above are paying anything close to it.

However having some of your wealth in cash is not necessarily a bad idea, if only for diversification. Cash is among the very few assets that’s delivered a positive nominal return in 2022 so far.

Remember, even if your cash is set to earn significantly less than inflation, it’s still worth bagging yourself the highest interest rate possible.

How much of your portfolio do you currently keep in cash? Have you moved your money recently? I’d love to hear in the comments below.

Can you tell when someone is bullshitting you? Hopefully so – because an ability to spot financial bullshit predicts financial well-being.

At least so say the psychology and economics researchers behind the paper: Individual Differences in Susceptibility to Financial Bullshit.1

The researchers claim that young, higher-income males are particularly susceptible to BS. These individuals tend to be overconfident about their level of financial competence, too. Quelle surprise. 

This leaves older, lower-income females as the most sensitive financial bullshit detectors. (Presumably because young males give them plenty of practice from an early age.)

The researchers even built a Financial Bullshit Scale to test consumers’ gullibility vulnerability. 

Sorry, that sentence should read: 

The multi-disciplinary task force of highly-skilled, cognitive behavioural scientists deployed a proprietary FBS^TM system to leverage high-value client identification solutions. 

You get the picture.

Distinctively synergise competitive vortals

The Financial Bullshit Scale measured participants’ ability to detect meaning within a series of ‘profound’ and contrasting ‘pseudo-profound’ statements. 

The profound statements were classic quotes about finance, as dispensed by luminaries such as Adam Smith and Benjamin Franklin. 

The ‘pseudo-profound’ statements came from an internet Bullshit Generator. 

See if you can spot the difference:

The scores refer to the researchers’ six-point meaningfulness rating: 

• 1 = not meaningful
• 2 = hardly meaningful
• 3 = slightly meaningful
• 4 = rather meaningful
• 5 = meaningful
• 6 = very meaningful

Controversially, Adam Smith was rated as less meaningful than five out of seven spins from the bullshit generator. Pegged as a blatant bullshitter, Smith was axed from the final table. Oh the ignominy!

For the study, a participant’s receptivity to the pseudo-profound statements was subtracted from their receptivity to the wisdom of the financial greats. This generated their financial bullshit score. 

The lower your score, the more easily impressed you are by financial bullshit.

Scalably reconceptualize market-driven architectures

Further tests probed participants financial knowledge, behaviour, well-being, numeracy, and capacity for cognitive reflection. 

Scores were correlated to establish whether an individual’s bullshit susceptibility could predict their financial behaviour and well-being. They also tested whether a weakness for BS was related to age, gender, education, and other demographic markers.  

The academics evaluated financial behaviour by asking participants how often they engaged in various money-related activities:

• Activities are rated on a five-point scale. 1 = never; 5 = always.

I suspect that many Monevator readers would notch hi-scores for this stuff. Though perhaps NHS-loving Brits would drop points for health insurance.

I’d earn black marks for maxing out credit cards and making minimum loan payments. (Only on 0% terms in my defence as a recovering stoozer). 

A quiz tested financial knowledge:

Again, I’d expect the Monevator massive to scoop A stars for this test.

(You got less than half marks? You’re hereby sentenced to re-read our entire website, starting with this warning on gullibility from 2007). 

Holistically drive high-yield wins

Thankfully the study concludes most people can smell bullshit to some degree. 

Females were typically more bullshit aware than males. 

And surprisingly, lower-income subjects had a better BS-sense than higher-income people. 

The study’s authors commented:

It seems reasonable to believe that as income rise[s] consumers become less vigilant when it comes to financial matters and therefore less alert when it comes to be[ing] affected by impressive financial language.

This seems to fly in the face of anecdotal evidence that lower-income groups are attracted to lotteries. 

Then again, high-income individuals can be easy marks for schemes that flatter their sense of status. ‘Attractive opportunities’ can be hard to resist when teamed up with ‘exclusive access’.  

The good news for Monevator types is that:

Participants with higher levels of numeracy, cognitive reflection, and objective financial knowledge were less susceptible to financial bullshit.

But the researchers warn:

Overconfident consumers (i.e., low objective but high subjective financial knowledge) were most susceptible to financial bullshit. 

File away that away for the next time someone insists their ‘monotonically disintermediated DeFi cloudified solution’ is going to the moon. 

Proactively actualizing user-centric functionalities 

Other interesting findings included:

The financial bullshit score did not correlate significantly with financial anxiety.

So a well-tuned BS radar did not contribute to how anxious people felt about their finances. 

Fair enough. My concerns about the heating bill aren’t much influenced by my desire to “currency trade like a pro” as per yon swish YouTube ad.

However, people’s financial bullshit score was negatively related to their financial security. 

Just because you’re paranoid doesn’t mean they’re not all out to get you. 

The authors believe gullible types may enjoy an “ignorance-is-bliss effect” when it comes to their subjective financial well-being. 

Finally, having an acute olfactory sensitivity to bovine excrement does not make people better behaved, according to the financial management behaviour scale. 

But the researchers do believe it will help you judge financial products and services that play bullshit bingo with your brain. 

Dynamically delivering organic bovillus faeces?

Well, I can’t wait to hear what you all think. 

For their part, the study’s authors anticipate that future research could:

Advance understanding on how to make individuals better equipped to distill financial communication and navigate the financial landscape.

That’s a laudable aim. 

The boffins also hope their research could cause financial institutions to lower the bullshit cannon that makes BS-savvy customers feel more insecure about their finances. 

On the other hand, perhaps the emerging field of Bullshit Studies will be flipped by corporate interests. 

Retailers infamously scour behavioural psychology literature, looking for cunning ways to route consumers past their sweetie displays.

Either way I don’t think the academics will run out of material anytime soon.

From my own experience, I can any assure budding professors of bullshit that the corporate world just can’t get enough of the stuff.  

Take it steady,

The Accumulator

P.S. Please post your favourite examples of financial bullshit in the comments. 

P.P.S. The Corporate BS Generator was of invaluable assistance in producing this article’s subheads. It’s a compellingly envisioneering career-maximising tool for networked professionals wishing to make an impact.  

1. Published 22 June in the Journal of Behavioral and Experimental Finance. [↩]