…take my tips and make your cash work for you
SINEAD RYAN – CONSUMER CHAMPION
OH dear. Mattresses are making a comeback, and not for sleeping on. It seems the more the Government wants us to spend our money, get the economy moving and buy Irish, the more likely we want to haoard, save and hide it away.
The annual Nationwide UK (Ireland)/ERSI savings survey shows that far from doing our duty, we’re so terrified of all the cutbacks, taxes and charges coming down the line that we’re sticking our money, if we have any at all, under the mattress – metaphysically of course.
And 58 per cent believe that the Government doesn’t help one bit – and they’re right.
Increasing DIRT tax to 30 per cent in the Budget was the stick rather than the carrot approach – punishing us for saving our money but giving us no incentive to spend it. Warning us of cutbacks and new taxes to come only makes us hold on to whatever we have. This is what economists call the “liquidity trap” and it’s the death-knell of small businesses.
Some 56 per cent of us would use spare cash to pay off debt rather than spending it – that’s natural; after all, debts carry interest and we’re only doing what’s sensible. Always pay off the debt with the highest interest first – that’s usually credit cards. Once they’re under control, you free up more cash.
Almost four in ten of us who can afford to put something by are doing it in case something unexpected happens. This is a big change from a few years ago where people’s priorities were holidays and a new car. It’s “fear factor” saving.
While 31 per cent of people can’t afford to save anything at all, the majority try to – 7 per cent save up to €25 a month while 19 per cent regularly save over €200 and they’re holding onto it rather than lashing it on holydays and other luxuries.
So this week, we’re buying into the zeitgeist and showing you where you should be putting your savings. There’s €86bn out there in deposit accounts from private households, according to the Central Bank, so we are a nation of hoarders.
Wouldn’t you imagine the Government would be encouraging us to get it out and moving around the economy rather than shoring it up?
Meanwhile, banks are falling over themselves to offer attractive deposits and we should take advantage of their desperation while we can!
With a bamboozling array of products and interest rates on offer from zero to over 4 per cent, how can you decide what’s right for you?
· Instant access accounts offer lower rates generally. If you don’t need your cash in a hurry, you’ll get a better deal.
· Some deposits require you to have a “linked” account – notably AIB. It’s not worth it just for that.
· Interest is either paid at maturity (fixed rate account), daily or at fixed dates in the year (say, April and October). Don’t withdraw your cash before you get your interest.
· Deposit Interest Retention Tax (DIRT) is 30 per cent of interest gained – all rats shown in tbank ads are generally gross.
· The average interest you’ll get for €100 a month for one year at 4 per cent is €26. Better in your pocket that theirs.
· Use a comparison website to save the legwork. Bonkers.ie and NCA.ie are both good.
· Opening a new account will require photographic ID, two utility bills or a bank statement.