‘In the first seven months of 2020 (Irish) households saved €9.8 billion. This is €5.5 billion more than in 2019 and €7.3 billion more than during the corresponding period in 2018’*
Yes, you did read this right. Almost €10 billion went into Irish banks in 7 months and that figure will finish well in excess of the €10 million mark by the end of this year!
Recession – what recession?!
Why are interest rates so low
Negative interest rates arrived to the door of the European Central Bank in 2014 and since then we have witnessed the development of a low interest rate phenomenon within our own retail banks that has lasted for an unprecedented length of time. Unfortunately it appears all flags are flying in the same direction for future years to come. We’ve even seen Bank of Ireland recently charge people for the pleasure of leaving their pension money in cash accounts at a rate of 0.65% per annum. Imagine making €100 on a €10,000 investment and having to hand back €65!
One can only assume that current accounts will be next on that negative interest rate hit-list, so start searching now for alternative saving options now!
Let’s put it in real terms. The general economic trend will see goods and services increase in cost, over time. Therefore your €1 today will be worth less in the years to come because most goods will cost more. This ladies and gentleman is what we in the biz call, ‘inflation’. So if the €1 you put into the bank today is still only worth roughly €1 in 5 years’ time, it has fallen in its ‘real’ value i.e. its purchasing power has been eroded because household items cost more now, despite getting back what you put in.
Also, even on the 0.1/0.2% interest rate you may gain, you will have to pay 33% DIRT tax.
Underneath the mattress isn’t looking so bad after all!
Easy access to your money
We know there are many people who prefer the psychological comfort of knowing that their money is ‘safe in the bank’ and that they can access it whenever they want so, start the fanfare, here is some good news if you fall into this bracket!
In order to give your new savings account a proper chance to work hard for you, you should be thinking about a 3 – 5 year minimum investment time. However you can also access your money whenever you want in an investment savings account. Most trusted advisors wont lock up your money, understanding that life in all its glory can throw you a hurdle, as well as a bone, from time to time. Having access to that money is very important for us in Trust Matters because we know it’s important to you. It may not be as simple as going to the hole in the wall but you will have it in a few days, if needed.
Low-risk regular investment saving options
For the people out there who would rather leave their money on deposit, even at the abysmally low interest rate yield, rather than take a bit of risk – there are plenty of very successful low-risk investment options out there.
Risk ratings fall between levels 1 to 7. Most people we meet fall into categories 3 or 4 so being able to offer highly effective funds within those lower risk categories has proven to be a game changer! Most people assume all investments involve taking huge risk and potentially losing all your money (the uneducated media and previous recessions have not helped that rhetoric!) but these lower risk rated funds will reduce your exposure to significant risk (not exclude it completely) and potentially give you a return far greater than what you would get in the bank, in a very short space of time. As Albert Einstein famously said, “Compounding is mankind’s greatest invention as it allows the reliable systematic accumulation of wealth.”
The bottom line and rule of thumb here is, if you don’t need access to that money for circa 3 – 5 years, the last place it should be sitting in is the bank.