How to build a better nest egg

In unpredictable times, a savings account can offer a real sense of security. But there are many options out there, and it pays to know the best fit for you

AS SAVINGS rates in Ireland continue to rise, Irish households are now putting away about 15 per cent of their disposable income. Given the level of economic uncertainty at domestic and global level, it’s unlikely to come down any time soon.

However, while locking money away rather than spending it might be bad for the economy, having a little nest-egg on deposit does offer peace of mind. So for those looking to maximise their return, what are the latest trends in the savings market?

ACCESSIBLE FOREIGN CURRENCY ACCOUNTS

While the past few years may have seen Irish savers cross the Border to save their money rather than spend it, or travel to Switzerland or Norway in order to keep their money outside of the euro zone, it is also possible to put your money on deposit in a foreign currency from the comfort of your home.

Nationwide UK (Ireland), the Irish arm of the UK building society, recently launched a range of sterling deposit accounts aimed at Irish savers. It offers several options, including an easy access account, which pays interest of 1 per cent AER. Lock-in for six months and the rate rises to 1.25 per cent AER, or up to 1.5 per cent for 12 months. The minimum deposit is £10,000 (€12,512) up to a maximum of £2 million (€2.5 million).

At Investec, you can put from €20,000 into a wide range of currencies, including sterling, Swiss francs, Canadian dollars and Norwegian kroner. Interest rates are again on the lower side, at about 1.5 per cent for a 12-month term, although if you’re prepared to consider Australian dollars, interest rises to 4.25 per cent AER.

At Permanent TSB, you can get a US dollar account, but interest will be just 0.10 per cent on amounts up to $5,000.

If you have outgoings in a foreign currency, perhaps through a property investment for example, it can be wise to keep some funds in that currency to hedge against fluctuations in the currency. But as you lock into your chosen currency at a point in time, you will also miss out on any gains should the currency move in your favour. In addition, interest on such accounts tends to be minimal.

And if you lodge your funds with a bank based in Ireland – even if it is a foreign currency account – there is no guarantee that should the euro collapse, or Ireland leaves the single currency, that your funds will remain in this currency.