Saving is important. It allows you to build a fund to pay for any unexpected expenses, and by saving for big purchases instead of borrowing, you can avoid paying interest. Building a consistent savings habit can also help you if you’re considering applying for a mortgage.
Before you start to save, decide how much you can afford to put aside each week or month and for how long. To do this look at your income, what you spend each month and what you owe on any loans. Our useful budget planner helps you to see how much you will have left over to save or invest. You can then set about starting your savings plan.
Clear your debts first
Paying extra off outstanding loans or clearing your balance on your credit card will save you money. Paying extra off your loans means you will pay less interest, and helps you to clear your debts faster. It can make more sense to clear debts, rather than hold on to savings, if the interest rate on your loan is higher than the rate you are earning on your savings.
Example
Seán has a €10,000 loan over four years, at an interest rate of 10.1%. Six months after taking out the loan he gets a pay rise of €100 a month and isn’t sure what to do with it.
⋅ If Seán puts an extra €100 a month towards the loan, he would save €583 in interest and pay off the loan 13 months quicker.
⋅ If he saves that €100 per month in a savings account with 3% AER, he could earn €160 interest over the 3 and a half years. This €160 is also subject to Deposit Interest Retention Tax (DIRT) tax.
In this example, putting the extra €100 a month towards the loan would save Seán around €475 when tax is deducted.
Use our loan calculator to see how much you could save if you reduce the amount you borrow. Then compare it to how much you would earn if you saved your money instead. You should also check if your loan has any early repayment fees.
Ways to save
Deposit accounts
Deposit accounts work by adding interest to your savings. Some accounts offer higher interest rates than others, you can use our Money Tool to help you shop around for the best interest rate for your savings.
The annual equivalent rate (AER), or compound annual rate (CAR) will help you compare rates on different accounts. The higher the AER or CAR, the more interest you earn, but remember a higher rate may mean you have less access to your money.
The difference between fixed and variable rate
Interest rates on savings and deposit accounts may be either fixed or variable.
Fixed interest ratesstay the same for a set time so you know what return you will get. You will not benefit from any rate rises but you will not lose out if rates fall.
Variable interest ratescan fall or rise when interest rates change. If rates fall, you earn less interest on your savings. If rates rise, you earn more.
You must pay DIRT tax on the interest you make unless you are exempt. More information can be found on the Revenue website.
How do you get access to your money?
Savings accounts give you access to your money either immediately or by giving notice of withdrawal. You can choose between different accounts.
A demand account has a variable rate of interest and allows you to withdraw your money immediately if you need it.
A notice account has a variable interest rate but you must give notice to withdraw money. In return, you get a better rate of interest.
A fixed-term deposit account – you get a fixed rate of interest if you leave your money for a set period of time, for example one or two years. If you need to withdraw your money earlier, you will usually get less interest.
State savings schemes
The National Treasury Management Agency (NTMA) offers a range of savings products which are available at statesavings.ie or through An Post branches, including:
Deposit accounts
Savings accounts including regular monthly savings accounts
Fixed rate/term products such as savings certificates and savings bonds
For more details go to statesavings.ie or visit any post office.
Credit union accounts
Credit unions are community-based organisations that provide services and loans for their members. To become a member you must fall within a ‘common bond’. This means you must:
Be living or working in a particular area
Be employed by a company which has a credit union
Be a member of a professional body that runs its own credit union
You can withdraw your money on demand from most credit union accounts, but you may have to keep a certain amount of savings if you also have a loan with that credit union.
What rate of return do you get on your savings?
Credit unions usually pay you a yearly dividend rather than interest on your savings. The rate given will depend on the level of profit your credit union made the previous year, so it is not guaranteed.
You must pay DIRT tax on the interest you make unless you are exempt. More information can be found on the Revenue website.
Savings accounts in other EU countries
As a European Union (EU) resident, you can shop around for banks/financial providers in other EU countries. There are a number of different websites and platforms available that allow you to compare the interest rates and terms of savings accounts available.
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The Deposit Guarantee Scheme (DGS) protects depositors in the event of a bank, building society or credit union authorised by the Central Bank of Ireland being unable to repay deposits. The DGS is administered by the Central Bank of Ireland and is funded by the institutions covered by the scheme.
The DGS protects:
Depositors if a bank, building society and or credit union authorised by the Central Bank of Ireland is unable to repay deposits
Eligible deposits up to €100,000 per person per institution
Current accounts, deposit accounts, share accounts in banks, building societies and credit unions
The Irish DGS protects deposits held at EU branches of authorised Irish institutions. Deposits held with credit institutions that are authorised in another European Economic Area Member State are covered by that country’s deposit guarantee scheme.
For information on how the scheme works and what institutions are covered, visit the DGS website.
