Monday 20 August 2018

Savers put record €101bn into banks as caution reigns

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Charlie Weston

Charlie Weston

Householders are piling so much money into savings accounts that it has pushed the amount on deposit in banks to an all-time high.

Consumers put an extra €309m into deposit accounts in April, to take the total to an all-time high of €101bn, new figures from the Central Bank indicate.

The flow of money into savings accounts is despite banks paying little or nothing in interest on money on deposit.

The best rate being paid by a bank for putting money in a demand account, where you can get immediate access to it, is 0.3pc from KBC Bank, according to comparison site Bonkers.ie.

This means that €10,000 on deposit would generate just €30 in interest in a year, before tax.

Yet savings account holders have put almost €3bn more into bank accounts than was withdrawn in the last year alone.

The figures also show banks held €12.1bn more in household deposits than they had out in loans at the end of April, indicating private sector credit growth is sluggish.

Along with the €101bn on deposit in banks, households have billions of euro in savings in credit unions and An Post savings products, with €20bn invested according to the semi-State company.

Collectively, credit unions have €14bn in savings, according to the Central Bank.

Alan McQuaid, of Merrion Stockbrokers, said: "The record level of deposits, despite ultra-low interest rates, still suggests that households remain cautious, and appear reluctant to take on more debt."

The OECD warned this week there are signs of overheating in the economy due to sharp rises in loans for mortgages and to smaller firms.

But Mr McQuaid said banking data indicated a weak overall credit environment.

Financial adviser Frank Conway said householders were still suffering from "financial post-traumatic stress disorder" following the economic collapse.

Mr Conway, founder of financial education website MoneyWhizz.com, said consumers with money should keep enough to fund them for six to 12 months in a rainy day fund, and take advice on investing the rest.

People should invest in a diversified investment fund, but consumers were afraid to take risks, which meant they were losing out, he said.

However, most people still feel singed from the downturn.

Rather than lose the lot on an investment that might go bad they are prepared to put up with no interest being paid as the price of ensuring they hold on to their money.

Irish Independent

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