Savings account ‘pays enough to cover cost of a holiday’ | Personal Finance | Finance

New findings suggest that certain savings accounts are now yielding enough interest to fund a week-long sunny getaway. Market analysis by peer-to-peer property investment platform, easyMoney, revealed that the average annual ISA returns received by UK savers over the past year could cover the cost of a seven-day package holiday.

Those who chose a specific type of ISA are well on their way to affording something slightly more lavish. easyMoney examined the average annual returns for various categories of ISAs over the past year to determine what kind of holiday savers could afford with their interest earnings after investing their full annual ISA allowance of £20,000.

This was then compared to the average price of a holiday, using data from the Post Office, Nimblefins and Which?. The typical seven-night package holiday costs £851, a sum easily covered by the previous year’s ISA returns. easyMoney’s study shows that the average two-year fixed-rate Cash ISA, opened in June 2023, yielded annual returns of 4.42%.

With a £20,000 investment, this equates to a cash return of £884 – more than sufficient to cover a one-week package holiday abroad. The one-year fixed-rate ISA option, with an average return of 4.36%, also generated enough to cover a package trip with annual returns of £872.

While Stocks and Shares ISAs have seen a struggle to keep pace with the returns of Cash ISAs over the last 12 months, they still pack a punch with an average interest rate of 2.8%. If you’ve stashed away £20,000, you’re looking at a tidy sum of £560 in returns more than enough to whisk you away for a two-night city break in a comfy three-star hotel, which on average will set you back about £301.

But what if your wanderlust yearns for something beyond the standard seven-night package holiday? Dreaming of a fortnight’s escape to exotic shores?

For those with eyes on a grander prize, the Innovative Finance ISA (IFISA) is the way to go, as touted by easyMoney. The year 2023 saw IFISAs boasting an average return rate of 5.4%.

With the same £20,000 nest egg, you’d be raking in an annual bonus of £1,079. Considering the average cost of a luxurious two-week long-haul getaway sits at £2,265, simply squirrelling away your IFISA earnings for a couple of years could almost entirely fund that dream vacation.

easyMoney’s CEO Jason Ferrando said: “Everyone has a different motivation for saving money in an ISA. For some, it’s about saving for retirement, others want to buy a house. But for a lot of people, it’s about making their money work for them in order to create additional income that can be spent on getting the most out of life.

“Getting away on holiday every year is something that many of us look forward to, but with the cost of living running so high, and income struggling to keep up with the increasing expense of day-to-day life, many feel they can no longer afford to spend hard-earned salaries on what now feels like a luxury.

“But putting your savings into an ISA account, be it a traditional Cash ISA or the increasingly popular IFISA, enables you to create additional wealth for yourself that you simply wouldn’t have by keeping your money in a current account.”