The Covid-19 pandemic led to a jump in savings as consumers had fewer options to go out and spend during lockdowns and some feared for their jobs. A few years on and many of these nest-eggs remain unspent, while recent Central Bank figures showed that Irish people saved 13.5 per cent of their income last year, up from 11.8 per cent in 2023.
This is slightly below the EU average, but the stock of savings of Irish households remains high. Since the financial crash after 2008, many have taken a more cautious approach to their financial position, with many also paying down existing debts, notably mortgages. Together with the savings pile, this has increased the financial resilience of the population.
But households are losing out by leaving around 90 per cent of their savings in demand accounts which typically only pay interest of less than 0.2 per cent. The Central Bank estimated that the losses involved were close to €800 million last year and this may now have climbed to close to €1 billion.
In many cases moving even a portion of savings to an account which requires a relatively short notice term to withdraw funds could yield a significantly higher return. This issue of access does seem significant for many – and the rise in savings again this year may reflect some nervousness about the outlook for the jobs market in the light of uncertainty caused by the unpredictable policies of Donald Trump.
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The big banks will feel no need to offer higher returns, even if they could afford to do so. They have long got away with paying interest rates below the euro zone average on demand deposits. And they have large deposit books giving them more than enough to fund their operations.
Savers need to be a bit more proactive, looking at options in their own bank, in EU banks which can be accessed via fintechs, the credit unions – which pay dividends rather than interest – and State savings. The only way to put pressure on banks to increase demand deposit rates is if enough people start moving their money.
