Is your Deposit Making Cents ?

Despite the fact that Deposit rates are at their lowest levels in a generation, many Irish people continue to leave their money sitting in the Bank rather than Invest in the Market where the returns are potentially higher. Research by Irish Life found that more than half of people with deposit accounts are dissatisfied with the returns on their savings, yet they don’t do anything about it. Why is this?

Why do people continue to invest in something that offers a return of almost zero with little prospect of improvement any time soon? The ECB have indicated that they are unlikely to raise interest rates until 2019 at the earliest.

Despite these historically low rates, for many consumers security of capital is still more important than return, which is why so many still favour deposit accounts as a home for their money. There are still billions of Euro on deposit in Irish banks earning virtually nothing. Recent figures from the Central Bank show that Irish households had more than €40 billion on deposit, earning an average interest rate of just 0.24%. The period of 2009-2012 saw a rush to safety, many Irish Banks were offering artificially high he artificially high deposit rates, this combined with the blanket government guarantee meant that too much money remained in this safe haven. Many of these accounts are now maturing .So, where to now for all of those customers who are looking for a better return on their money?

I would always advocate leaving some funds on Deposit and easily accessible, an emergency fund if you like, this should usually be the equivalent to approx. 6 month’s salary. Beyond that, you need to get your money working harder for you.

What’s the first step? Firstly, find an Independent financial adviser that you are comfortable with, find out what companies they deal with, can they provide you with a market wide offering, ask them their credentials, experience, qualifications etc.

All good financial advisers should take you through a risk profile questionnaire which will not only help you determine your appetite for risk but also your capacity for loss. Once this has been determined they will help you decide what type of Asset mix is most appropriate to your Risk profile. To see the real benefit from this type of Investment you really need to remain invested for a minimum of 5-7 years. During this time you may experience some market volatility and will no doubt also experience a period of negative returns however over all you should comfortably outperform Deposits over the term

Barry Kerr BBS QFA CFP® is the owner of Wealthwise Financial Planning, Bridge St, Carrick on Shannon, www.wealthwise.ie. Barry Kerr T/A Wealthwise Financial Planning is Regulated by the central Bank of Ireland. All details and views contained within this article are for informational purposes only and does not constitute advice. Wealthwise Financial Planning makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use.