Personal Finance

It's time to get our hands on some of the banks' money

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Simon Moynihan

Simon Moynihan

Staff Writer has been lucky enough to feature a few times in the press and on the radio this week. We worked out that Irish savers are missing out on over €1bln (yes, that’s really one billion euros) in interest that they could be earning by leaving their money in low interest accounts. We sent this info to the press, and some journalists and radio stations thought it was interesting enough to go with.

In a nutshell, what we were saying is that interest rates in Ireland are much higher than they should be, interest rates this good won’t last long and Irish people should take advantage of them while they can.

Why? Well, because Irish banks are on a deadline. The new regulator says they have to increase the amount of actual cash in their coffers before the end of the year to protect them against failing in the future. For most banks, this means doubling the amount of cash and reserves they hold on to.

Irish banks have to find this cash from somewhere and we, the humble citizens of Ireland, are their targets. But to get us to change bank accounts or move our money out of the post office, they have to give us something worth moving for, and that’s high returns on our savings. Rates are so high in some cases that you can earn more on your savings than you’re paying on your mortgage - especially if you’re one of those lucky tracker people.

The thing is that people with tracker mortgages aren’t really that lucky; they just saw an opportunity and jumped on it. Now they are reaping the rewards with super-low mortgage payments. In some cases, homeowners with trackers are paying as little as 1.6%. It’s so low because the ECB rate is just 1% and tracker mortgages follow the ECB – then the banks tack on a bit extra for themselves.

There’s a similar opportunity right now with savings rates and we should be taking advantage of them. As soon as the banks reach their cash goal, interest rates will most likely fall because they’ll have no incentive to offer the great rates anymore, and with the ECB rate at just 1%, savings rates in Ireland are artificially high.

Ok, talking about savings isn’t very exciting - but cash is. Most people like money, and here’s how to get more of it. Let’s say you have five grand in a deposit account – the one your bank suggested you open. It’s probably a demand account so you can get at your cash whenever you want to, but most demand accounts only pay 0.01% interest...

0.01% is so low that it might as well just be zero. With five grand in a demand account at 0.01% you’ll earn just 50c interest in a year… and here’s the worst thing; Irish people have €37bln in accounts like that.

By taking our money out of these terrible accounts, we can earn 3.3% interest and still get at our money whenever we need to. If we’re prepared to lock our cash away for a year, we could earn 3.5% and beat that end of year drop in interest rates. That’s 350 times as much interest! And we can earn even more if we’re prepared to save for longer. For our five grand, that means that instead of earning 50c, we can earn €175 a year. Not bad the half an hour it takes to change accounts.

Last time I made €175 in half an hour I was at a blackjack table in Vegas, but that’s a story for another blog.


If you’re thinking of finding a better home for your money, our graphic designer put together a “best-buy” table of rates below. It’s for that five grand we were talking about. To compare savings accounts for different amounts, just use the savings tool.


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