Personal Finance

Saving index falls but Irish still have the saving bug

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Simon Moynihan

Simon Moynihan

Staff Writer

Last week, a new monthly savings index was published by Nationwide UK and the ERSI. Their plan is to release new figures every month that will act as a sort of barometer of how Irish people feel about saving.

The first figures got some good press. They told us that the index has dropped by 7 points since the start of the year. The drop means that sentiment towards saving has gone down and we Irish just aren't as gung-ho about socking away the cash anymore.

"Savers start to feel the pinch" was how the index was interpreted by one national daily, while another saw it as a hint that consumers thought the worst of the recession was over. A bit of a contradiction... we either don't have as much to save, or we just don't feel like saving as much anymore.

I thought this was interesting because it was only a few weeks ago that Permanent TSB were delighted to say that the number of people saving regularly with them had gone up by 163% since 2008!

Permanent TSB are sharing the success of their campaign to bring in deposits and savers, but it still makes a curious counter argument to the Nationwide UK/ERSI index. Permo also said that the average amount being put into regular savings accounts is higher this year than it was last year. Up to €250 a month from €200. So more money being saved, more savers... what are Nationwide UK and the ERSI basing their index on?

Well, the index is the result of 4 monthly surveys of 800 people. Survey participants were asked if they were saving regularly and if so, was it more or less than in previous months. Then those that said they weren't saving regularly were asked if they were saving anything at all.

The survey found that the number of people who said they were saving regularly had fallen, and the number of people that weren't saving anything at all had increased. It seems that they are could be on to something. The Central Bank's latest numbers tell us that the amount of money on deposit has fallen by about €1.4 billion since February.

The thing is, Permanent TSB is right too. Their two big accounts are notice accounts. A 35-day notice lump sum account and a 21-day regular saver. The Central Bank says that the amount of money in notice accounts has increased by nearly €400 million for March.

There's been plenty in the press over the last couple of years about how we've gone from a nation of spendthrifts to a nation of savers. We've stopped spending like sailors on shore leave, we look for value and bargains, and we've developed a strong saving habit. The Savings Index says that a whopping 69% of people still think it's important to save regularly.

There are a lot of theories about why we've been stashing away so much of our income. People are uncertain about their jobs and want an emergency fund, credit is much harder to come by and Permanent TSB says many of their new account holders are saving for house deposits.

Saving for house deposits helps explain Permanent TSB's huge increase in regular savers. We know that the banks want to see big deposits and a strong saving habit before lending, and Permo also says that the majority of its new regular savers are in the 25 - 35 age group. This is the main age group of first time buyers. Rates for regular savers are extremely strong, so it's certainly a good time to save if you can afford to do so.

In a final piece of good news, the Consumer Sentiment Index which tracks how people feel about their future financial situations increased for April. According to KBC Ireland/ESRI, the economy is reaching a turning point and consumers' optimism is returning.

The movement of money from low interest demand accounts to high interest notice accounts also seems to show that we really are looking for better deals and higher rates. It will be interesting to follow the Savings Index in the months to come to see how our attitudes to saving change and if our optimism about the future keeps improving.

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