There are a lot of clever ways to invest today, along with some less clever ways. Turning buying stocks into a game on a smartphone app is just one new (and fun) way, but for many people it may be too risky a way to secure their savings. Everyone knows, however, that they still need a solid foundation, particularly for retirement.
That foundation may include funds but it certainly must include cash savings – money which is not tied up in the market or in any other complicated financial vehicle. Even as people’s basic need for access to some of their wealth does not change, the economy does not always cooperate.
It is essential to have a basic bank account, and it is helpful to have a separate savings account – we often learn this lesson early in life when we notice that we keep spending our “savings” if they are not squirrelled away safely in a different bank account. But the smartest type of account is the term deposit, because this, of course, is where we earn a yield on our cash savings.
Interest rates, however, have been low for years now. In fact, Ireland has the lowest interest rates on fixed-term deposits in all of Europe, according to savings platform Raisin’s research of lowest and highest rates across Europe and the United Kingdom. The European Central Bank, moreover, reveals that thirteen out of nineteen countries in the Eurozone have higher average interest rates than Ireland. These low rates at local banks present a challenge – well, a significant loss – to Irish banking customers who want to do the wise thing and keep a segment of their money in savings. Raisin’s raison d’être is to solve just this problem by making it easy to access the better interest rates in other parts of Europe, like France, Germany, Italy, or even as far afield as Latvia. It may sound like a terrific vacation itinerary but these countries happen to have higher interest rates than Ireland. Often, it’s simply due to their having more banks, and more types of banks, that in turn have better profit margins on their lending businesses and are thus able to offer customers a higher return on their deposits.
However you gain access to more profitable, secure savings deposits in other parts of Europe, the key thing to remember is that earning a yield on your savings makes a difference. Just take the difference between Ireland and France as an example: as the European Central Bank shows us, on average, French savers earn four times more interest on their savings than the Irish do – or what about Italy? Italians earn eight times more. If you keep 50,000 euros in a 1-year term deposit earning 0.1% in Ireland you come out with 50 euros interest at the end. But in France you earn 200 euros, and in Italy 400! Now, imagine keeping that 50,000 in the bank for five years and letting the interest compound, and by the way, for a 5-year term deposit you are earning much more interest. You begin to see that interest rates are about more than pocket change – and even pocket change is worth keeping track of!
When you are divvying up your savings and keeping part of it available, make sure you use term deposits, the clever option, and in doing so don’t only look within Ireland for the best interest rates. We have great benefits in being part of the Eurozone, and part of Europe – including a EU-wide harmonized regulation on deposit guarantee schemes to protect Europeans’ savings. Use this to your advantage and get a solid return on your hard-earned money.
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