“If you would be wealthy, think of saving as well as getting” – so said Benjamin Franklin, the face of the $100 bill. Of course, that may sound easier said than done; but as a people, we Irish like to save. Our household saving rate stood at just over 8% of our disposable income at the end of 2017 – that’s a third more than the UK (5.3%) and almost three times as much as US savers (2.8%). In fact, according to a 2016 survey by Irish Life, almost half of Irish adults have savings accounts, reporting an average nest egg of €32,000; 20% have more than €50,000; while 13% have saved over €75,000.
For some readers, this may come as a shock. If you’re wondering, “Have I missed a memo somewhere?!”, the truth is that there’s no magic solution: saving takes hard graft and dedication. But for many, the harsh reality is that saving feels like more of a luxury than a necessity.
Part of the problem is return on investment. The same survey indicates that 56% of savers are dissatisfied with the growth of their savings – and rightly so! Any interest on savings lodged in Irish banks is taxed – DIRT (Deposit Interest Retention Tax) at currently 37%; and for PAYE earners under the age of 66 with unearned income exceeding €3,174, PRSI (Pay-related Social Insurance) will trim off a further tidy 4%. Given that interest rates are continuing to drop, it can be a little disheartening; however, the most important thing is to do your homework – and then simply start to save!
Types of account
Some accounts will cap the amount you are allowed to save; others may require you to also have a current account with the bank. Depending on your needs, different accounts will suit you:
- Fixed/Deposit account: you deposit a lump sum that cannot be withdrawn before maturity.
- Notice account: an account that requires a certain amount of notice before withdrawal.
- Demand account: an account that requires no notice before withdrawal.
- Regular saver account: an account into which you deposit savings on a regular basis.
- Parent/child account: an account set up for the future benefit of a child.
Current top deposit account earners
Fixed/Deposit – you agree to invest your money for an agreed period
- National Treasury Management Agency 10-year National Solidarity Bond: 1.5% AER tax free; min./max. balance €50/€120,000
Notice – you agree to give a specified notice to withdraw your monies
- KBC 35-Day Notice: 0.65% AER; min./max. balance €3,000/€100,000
Demand – you can withdraw your monies at any time
- KBC Smart Access Demand: 0.3% AER; min./max. balance €3,000/€100,000
Regular saver – save between € 100 and € 1000 for 12 months…some restrictions apply on withdrawals
- KBC Regular Saver: 2.5% AER; min./max. deposit €100/€1,000 per month – you must open an “extra” current account with them otherwise it is 0.5%.
- EBS Family Savings: 1.75% AER; min./max. deposit €100/€1,000 per month.
- Bank of Ireland 365 Monthly: 1.2% AER; no min., max. deposit €2,000 per month.
- Bank of Ireland Young Saver: 2.5% AER; min./max. balance €0/€5,000
- Train yourself into adapting to life “without” the money you’re saving by setting up a direct debit to your savings account for the day after you get paid. If you never see it in your current account, it will be easier not to think of as disposable income; before you know it, it will just be a safety net, working away in the background.
- Pay off any outstanding debt before you start to save: borrowing costs more than your savings will earn you, so be smart with your priorities.
- Save for necessities first: three months’ worth of expenditure if you’re single without commitments; six months’ worth if you have a family, mortgage, vehicle, etc.
- Check your local Credit Union. Although many don’t offer interest or dividends based on a directive from the Financial Regulator, it never hurts to investigate.
- Claim back any DIRT you have been incorrectly charged, or register exemption by completing Form DE1 at your local Revenue Office.
- Remember, the Deposit Protection Scheme guarantees €100,000 per person per deposit-taker of your savings.
Email me further details – jlowe@moneydoctor,ie or call the office + 353 1 278 5555