Monday, 01 December 2014 00:00

Is it costing you to keep your cash in the bank

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We can all remember a few short years ago when banks were competing for our savings, offering retail savers interest rates of over 4% p.a. However these days are unfortunately now a dim and distant memory as savers struggle to get any return at all on their savings.

In addition to this, the full amount of savings was protected with an unlimited government guarantee through the Eligible Liabilities Guarantee (ELG) scheme. Even this is gone now, with savings in excess of €100,000 no longer protected. On top of this, the Deposit Interest Retention Tax (DIRT) rate was increased to 41% from 1st January 2014 and this is applied every year to any gains in your deposit account.

So what so you do now? Does it make sense to keep your money on deposit or is it time to look at alternative ways to grow your money?

Holding cash is costing you money

By the time you add up all of the impacts outlined above, it starts to become clear that keeping money in a bank account may not be the smartest way to manage your money. Thankfully there are some lower risk investment alternatives available for you that can be considered, at least for some of your money. While some people may think that “investing” is not for them, there are not too many savers who are content with seeing themselves getting gradually poorer. And that is what is actually happening by keeping your money in the bank. Here are some of the costs of keeping your money on deposit,

Inflation risk:This is often overlooked especially when interest rates are virtually zero as they are today. Any price inflation will erode the purchasing power of your savings.

Tax advantages: DIRT tax rates increased to 41% this year, and this rate is applied to your gains each and every year. Exit tax is applied to gains made in investment funds at the same rate (41%), but this is only applied every 8 years or at encashment if sooner. This results in a lower tax take from your hard earned gains.

Return on investment: While deposit rates are zero, your cash doesn’t grow. There are low risk investment opportunities that are worth considering, aiming to get some return for the money that you’ve built up.

Lost opportunities:Keeping money on deposit can mean missing the potential growth opportunities in markets. Markets tend to be cyclical, so if you can time your entry well, there are potential opportunities for gains.

How do you get some return?

At Cregan Kelly O’Brien Financial Planning, we believe that managing risk sits at the heart of every saving and investment decision. So for this reason, before we talk about your money, we need to understand you and your attitude to risk.

We start by explaining the inextricable link between risk and reward so that you have a full understanding of the impacts of risk on your potential returns. We then work with you to clarify,

  • Your appetite for risk: How much risk you are happy to take?
  • Your capacity for risk: Can you actually afford to take risk?
  • Your need to take risk: Depending on your objectives, how much risk do you actually need to take?
  • Once we get clear on these, we can then start thinking about building a portfolio to suit your needs. And we need to also understand what your objectives are and why you are saving. Are you saving for a deposit for a house, or to educate your children, or building a next egg? When are you likely to need the money? All of these will influence the type of portfolio that you need.

    And finally you’re secure in the knowledge that any suggestions and recommendations from us are completely impartial, as we are not “tied” to one single institution. So we will work hard to find the right solution for you.

    Is it time to get your money working for you? We would love to help so please give us a call!

    Last modified on Monday, 01 December 2014 12:48
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    About Cregan Kelly O'Brien


    In 2007 Maurice Cregan and Colm Kelly established CK Financial Services to provide financial planning and advice to business owners and individuals. Tommy O'Brien, a General Insurance expert, then joined them in 2010, enabling them to meet the full financial needs of their clients. Financial Life & Planning Limited would deliver Financial Services, and O'Brien Cregan Kelly Insurances would deliver Insurance Broking services. Two Business Names were registered Cregan Kelly O'Brien Financial Planning and Cregan Kelly O'Brien Insurances

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