You should shop around for best return on your savings
The Irish savings market is gradually emerging from a turbulent few years. Fears over the euro's future, the strength of banks, and the sovereign guarantees attached to them have driven savers to take moves to protect money on deposit.
Much of the concern surrounding the security of deposits has abated over the last two years.
For depositors however, the improved banking landscape, the threat of deflation, and the lacklustre economic outlook has led to a considerable reduction in deposit interest rates.
Back in October 2011, you could have got an interest rate of up to 4.25 per cent on money put into a 12-month fixed deposit account. Today, the best rate you'll get is 2.3 per cent.
The tax paid on savings interest has also rocketed in the last few years – from 27 per cent in 2011 to 41 per cent today.
This has eaten into the returns you can expect when you put money on deposit. If you put €100,000 on deposit for a year today, you can expect to make a return of up to €1,357. But three years ago, you could have made up to €3,102.50.
Here are seven ways you can be more proactive with your savings.
* Shop around the various banks for interest rates. The current market-leading 12-month deposit interest rate of 2.3 per cent is not available in all institutions – and more often than not, savers are accepting much lower rates.
You can easily check the deposit rates paid by the various banks on sites such as www.irishdeposits.ie, www.bonkers.ie or www.consumerhelp.ie.
* Consider the longer-term deposit rates being offered by some institutions. Interest rates are expected to fall further in the short term so longer-term rates offer you the chance to secure a reasonable interest rate before they do.
* Bear the Deposit Guarantee Scheme in mind if you have hundreds of thousands of euro to put on deposit. Under this scheme, savings of up to €100,000 per individual per institution are protected. By spreading savings across a range of institutions, you'll ensure your savings are guaranteed by the State.
* Check the credit rating of the company you are considering saving your money with.
Credit ratings are an indication of the credit worthiness of a particular institution – and how secure your money is if held with it.
* Weigh up the risk and return of any deposit or investment product you are considering. For some savers, security is more important than a good rate of return.
Assess your priorities and take an informed decision so that you achieve a return you are happy with – without taking a risk you are uncomfortable with.
* If your account matures, know exactly when it will do so – and what interest rate will kick in at that stage. Banks frequently roll maturing deposits at rates lower than their highest available – by staying informed, you can prevent this happening.
* When you put your money into a straightforward deposit account, there is no risk of losing any of the money invested in such accounts – although inflation will eat into the value of your savings over time.
Be careful about chasing returns offered or promised by other types of investments. With higher returns comes risk. Lessons of the last 10 years need to be learned.
Harry Slowey is a director of Finance One, which owns the deposit comparison website irishdeposits.ie
Sunday Indo Business