With over €100 billion sitting in deposits across Ireland earning less than one percent and a wide range of saving and investment options available, it can be challenging to decide where to put your hard-earned money to avoid it being eroded by inflation.
To ensure your money is working at its fullest potential, Nick Charalambous, Financial Advisor and Managing Director of Alpha Wealth, a leading impartial financial advisory firm, shares four essential savings strategies:
1. Segregate Your Savings by Time
Categorize your savings into short-term (next five years), medium-term (five years to retirement), and long-term (retirement and beyond) “pots.” This structure allows you to align your financial strategy with your timeline and risk comfort level. For example, short-term savings should be in secure, low-risk deposit accounts. Medium-term savings can include options like ETFs or diversified investment accounts with potential returns over 5% annually but may come with moderate risk. Long-term savings, such as pensions, not only offer higher growth potential but also significant tax advantages.
2. Shop Around for the Best Rates
Once your savings are categorised, finding the best rate for each time period is crucial. While traditional Irish banks like AIB and Bank of Ireland offer low deposit rates, foreign online banks like Raisin, Trade Republic, and Bunq can provide more competitive interest rates of over 2% annually (before tax). Revolut’s entry into the Irish market has opened eyes to these options, demonstrating that better rates are achievable. For monthly savings, AIB and Bank of Ireland do offer rates as high as 3% (as of November 2024), but understanding the terms is essential to maintain those benefits over time.
3. Understand Fees, Charges, and Taxes
Hidden fees and tax implications can eat into your savings. For instance, while Revolut and N26 accounts may have additional fees, Trade Republic and Lightyear typically do not. When investing for the medium term (five years or more), fees set by brokers can vary widely. High management charges or contribution fees can erode your potential returns, so it’s important to choose wisely and compare offerings. Additionally, some accounts are taxed differently, so knowing the details is key to optimizing your returns.
4. Seek Impartial Financial Advice
While it’s tempting to rely solely on personal research, getting impartial financial advice ensures a well-rounded perspective. Tied agents, such as those from AIB or Bank of Ireland who represent Irish Life or New Ireland Assurance, respectively, may only offer limited product choices. Independent financial advisors, on the other hand, can present a wider range of investment and savings products, ensuring you find the best fit for your goals. Consulting an independent advisor provides valuable insight into diverse options, helping you make informed decisions tailored to your financial needs.
Book a financial review with Alpha Wealth at www.alphawealth.ie for trusted financial advice on tax savings, pensions, investments, and more.
