When Charlie McCreevy launched Special Savings Incentive Accounts (SSIA) in the 2000 budget, he reportedly told officials that he wanted to give people more of their own money, "but I want them to save some of it". It's taken a few years and the threat of redundancy and repossession, but the Irish have finally caught the savings bug in a big way.
According to 2008 figures released by the Central Statistics Office earlier this month, we are now saving at more than double the rate of just two years ago. Money going into savings accounted for 4.2% of individual disposable income, up from 1.7% in 2007. The savings boom is unlikely to stop there: a Postbank survey found that the proportion of people saving has risen by 7% in the past year to more than 80% of adults, despite deep cuts in pay and higher taxes. Indeed, anecdotal evidence suggests that saving this year has been even more intense, with people preparing for the worst as the economic doom rumbles on.
Kevin Johnson, chief executive of the Credit Union Development Association says there has been a clear change in sentiment toward saving.
"We have noticed credit union members taking a longer-term approach and preparing for the unexpected. Saving is habitual in nature, so this recent increase in our financial prudence is welcome," he says.
Cash has traditionally been seen as the boring, safe option, but with the government guarantee and deflation ensuring that your money is working hard for you no matter what interest rate you get, deposits make sense for the risk-averse. You may not have benefited from the stock market bump since March, but at least you can be sure you won't be affected by a 'dead cat bounce'.
That said, interest rates are coming down. The rates available today are nowhere near the highs reached in October of last year when the embattled Anglo Irish Bank was offering a fixed rate of 6%, so it is important to shop around and find the account that suits you best.
Saving on the go
For people who do not have a lump sum available and who want immediate access to their money, the options are limited enough. To get that instant access you are most likely going to sacrifice a decent interest rate or accept that you can only lodge a limited amount to the account. However, there are some good rates available if you shop around.
Both Irish Nationwide and Halifax offer instant-access deposit accounts with 3.75% interest. However, the Irish Nationwide account allows you to save a maximum of €20,000 while the Halifax Flexisaver offers that rate for the first year only, after which the rate reverts to 2% and the rate applies to balances up to €10,000.
Anglo's Premium Demand account has no restrictions on the amount you can deposit and gives a rate of 3.1% (this reverts to 3% on balances over €100,000).
Rainy day savings
If you feel relatively secure in your position but don't want to tie your money up long-term, you should consider a regular savings account or short-term fixed rate account. Some regular savings accounts will restrict your access to funds while fixed-rate accounts will likely require you to leave the money in for the full term to avail of the rate offered.
If you have a sum you want to put by monthly, consider Anglo's Regular Saver Account: it allows you to save up to €1,000 a month and the current rate is 4%. You have no access to your money for six months, however, with withdrawals unlimited thereafter.
Irish Nationwide is offering a Regular Savings Account with a 4.35% rate but this reverts to ECB plus a minimum of 1% at the end of the year so, at this stage, you are too late to reap the full benefit of the current rate.
AIB also has an account geared towards families – the Parent Saver – which allows you to save a maximum of €200, attracting 5% interest (ECB plus 4% until May 2010) for the first year with funds transferred to a 3% deposit account thereafter. This is, however, an instant access account.
Similarly, EBS has a Family Savings Account with a €1,000 monthly maximum saving, attracting a fixed rate of 4.5% for the first 12 months. Withdrawals are limited to two per year.
If you have a lump sum to invest for a short period, South African bank Investec is offering a fixed rate of 3.5% for nine months or 3.25% for six months with a minimum deposit of €20,000 required. Deposits of up to £50,000 (€56,000) with Investec are covered by the British government's guarantee scheme.
One of the positive aspects of regular saving that is often ignored is the impact it has on your ability to secure credit. Many mortgage brokers will tell you that the banks have considerably tightened up their criteria, and demonstrating that you can save regularly is becoming increasingly important in securing a loan. Even if you aren't planning on applying for a mortgage, small loans from institutions such as credit unions will be more readily available if you make the commitment to save.
"The immediate and future availability of credit facilities, should people need them, is an increasingly important consideration," says Johnson. "Most people forget this, but one of the core benefits derived from saving is the clear demonstration of your financial prudence. Credit unions will invariably reciprocate this commitment with loan facilities when you need them, while many other financial institutions are only interested in your saving and not lending."
This time last year you could get great rates for lump-sum deposits lodged for 12 months and more. However, rates have fallen considerably since then.
Irish Nationwide is in a three-way tie at the moment in the 12-month market with a fixed rate of 3.5% (€20,000 minimum). A similar minimum applies for Investec's 3.5% rate; however, Anglo will take balances from €1 to €1 million at the same rate.
If you are looking for something more long-term, Anglo offers a two-year fixed rate of 6.61% and 10.07% for three years. Bank of Ireland is offering a fixed return of 9% over three years on deposits of more than €20,000 and AIB offers 10% on amounts over €25,000 for the same period.
Longer-term fixed rates give you some security against fluctuating interest rates but it's a bet that could backfire if rates rise substantially.