Savings Q&A with Charlie Weston
Q: Should I bother to save?
A: Savers will take a hit with the latest ECB move. While interest rates on deposits have been falling, this will force banks to cut deposit rates even further.
There is no money to be made in savings and, with the 41pc DIRT (deposit interest retention tax) on deposit interest, banks have become holding places for cash, according to Frank Conway of MoneyWhizz.org. But it makes sense to save money especially for emergencies, and old age. And stashing cash at home is a bad idea security-wise.
Q: So where will I get the best rate?
A: Right now An Post savings certs and bonds look to be the best bet. Although the interest rates are not high, there is no tax due on these savings. The downside is that you have to lock your money away for at least three years, in the case of the bonds, and five-and-a-half years for savings certs.
Q: But what if I want to stay with my bank?
A: Banks are notorious for enticing people to open a savings account with a good rate, and then slashing the interest paid soon after that.
You should check with the bank which of its accounts is paying the best rate at the moment. You may have to leave your money on deposit for a long period to get a decent rate.
Q: I have a tracker. Would I be better off paying down my mortgage?
A: No. Despite some calls for tracker mortgage holders to now 'overpay' their loans, this is not the best use of your money. You should build an emergency fund with the savings on the mortgage repayments.
This can then be used as an alternative to using more expensive forms of finance such as credit cards, credit union or personal loans and even money lenders.