Do you enjoy paying the bank to hold your savings?

Household deposits in Ireland stood at €135bn at the end of September 2021.

This leaves us scratching our heads a bit… This money is earning no interest, in some cases negative interest rates are applied and the value of this money is falling as inflation reappears in the Irish economy. Money
sitting in a bank account is making people poorer. So why are deposits at record levels?
There’s no doubt that some people are completely risk averse and see deposits as risk free. Yes they
are guaranteed up to €100,000 in each institution, but they are also guaranteed to make you poorer
in the current zero interest environment with inflation gathering pace. Other people may have had
poor experiences with investments before the financial crash, others may like to know they can
access their cash at the drop of a hat. For others, it’s down to inertia – the money’s fine in the bank
and it’s too much hassle to move it (tip: it’s not difficult at all). We recognise some of these reasons
for holding cash, but surely there has to be a better way?
Some money on deposit often makes sense
There’s no doubt that an emergency fund that is immediately accessible in a case of crisis is a very
valuable asset. Deposits can make sense here, or indeed if you have a very short time horizon before
using the money. But these reasons often don’t require placing all of your money on deposit where
it will earn zero or negative interest rates.
Inflation is the enemy for deposit holders today
Inflation was forecasted at 1.5% – 2% for 2021 and the same again for 2022. This is the silent killer
for deposit holders, reducing their purchasing power and making them poorer as their money sits on
deposit earning no interest.
We always come back to diversification
When we advise people regarding their assets, we always come back to diversification and not
having all your eggs in one basket. Deposits play a role in most investment strategies, but so
potentially do other asset classes such as property, equities, bonds etc.
A carefully crafted investment strategy considers your time horizon, your appetite and capacity for
risk, and the broad range of asset classes available to you. The goal is to create a strategy that will
enable you to achieve your investment objectives, while living within your stated risk parameters.
Get your money working for you
So what do you do, because no-one wants their wealth to just dwindle away? We think that you
start by deciding what you want your money to do, what your actual objectives are. When you’re
clear about these, have a chat with us. We’ll help you to clarify your timeframes and your attitude to
risk. Then we can come up with a plan to help you achieve those objectives. The plan may well entail
some of your money remaining on deposit. However, going forwards your assets will be aligned with
achieving your own stated objectives. This beats watching your wealth drain away in the bank.

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