We really sat up and took note of some recent analysis shared by the Central Bank of Ireland, in which they revealed that Irish households had just a shade under €100bn in deposit accounts at the end of March this year, up from €95bn a year ago. And how much do the banks pay you for this money that they in turn lend out at meaty enough interest rates? Very little… with most savers struggling to get a return above 0.5% p.a.
Why is this money just sitting there? There’s no doubt that some people like the feeling of security of having money in the bank, where at least the actual value of it is not going to fall. But this is not always a good strategy, as any inflation at all above ½% p.a. means you are losing money in real terms. Others may keep their money on deposit for spending in the short-term. But as the figures show, this money continues to be saved rather than being spent. For more on how inflation effects savings click here.
The good news is that there are alternatives out there that are worth considering. We really believe that it’s in situations such as these that we can really earn our corn, when faced with a challenge of helping cautious investors consider alternative savings approaches that may involve a small amount of risk, while still ensuring you are able to enjoy a good night’s sleep…
Be clear about your objectives
Why are you actually saving money? Is it for a big holiday next summer or is it for your children’s education in 10 years’ time? Or indeed are you thinking about your retirement? Your goals and objectives would sit at the heart of our advice, as they determine the strategy, and they will determine whether keeping your money on deposit is the right thing to do, or not. For more saving tips for all ages, click here
Be clear about risk
Once we’re clear about your objectives, you need to get clear about your attitude to risk. If you are a very cautious investor, this requires a different approach than that followed by more aggressive investors. Your appetite for risk (how much you like to take) and your capacity for risk (how much you can afford to take) need to be carefully determined, as these will fundamentally influence the required investment or savings vehicle needed, and the type of assets that you might invest in.
Consider your options
If you are a cautious investor who to date has left your money sitting in a deposit account, we can run through alternative ways of saving your money, including looking at savings plans that invest in different assets such as shares, property and bonds, as well as cash. While this could mean slightly more risk, we’ll give you some proper perspective on this – when it is explained fully to you, you might decide that the alternatives are definitely better than your current approach.
At the end of the day, leaving money on deposit may not be the best approach for you. We would welcome the opportunity to chat through the alternatives with you, and find the right one to meet your specific objectives, your timeframe and your attitude to risk. And no matter what happens, we’ll do our best to make sure your sleep is not disturbed!