At a confirmation party recently, two members of the same family – the sweet-faced young boy of 11 whose confirmation it was, and his sweet-faced grandad of 81 – asked me pretty much the same question – where’s the best place to put my (our) money?
Just about everyone who still has a job these days is saving. Our average rate of savings is reportedly up to about 11 per cent of disposable income nationally – the highest since the last recession in the 1980s.
People are fearful about their financial security- and with good reason.
Misguided economists have, for quite some time, missed a significant point: when your personal balance sheet – or that of your nations’ – is deeply impaired, then cutting your spending and increasing your savings is a very sensible thing to do indeed.
Anyway, my young friend is now an incredible €910 richer thanks to his generous family and friends, and the grandad revealed he too has rather a lot of cash: his lifetime’s worth of a nest egg is at least 100 times that of his grandson.
Essentially, what I told them is this: the choice of deposit homes for lump sums is certainly shrinking. Postbank and Halifax are in the process of closing down the savings (and current) accounts of tens of thousands of customers.
Then there’s the uncertainty involved in leaving your money with the likes of Anglo Irish Bank, Irish Nationwide, the ESB, AIB and Bank of Ireland, all dependent on the support of the government, tax-payer and international bond-holders to keep their doors open.
No one knows for sure where their collective futures lie: will NAMA fully capitalise them so that they can operate independently again?
Will any of the latter four have to be fully or further part-nationalised? Will they be merged with each other or other institutions to create a single large bank or the ‘third force’ bank that has been bandied around?
The zombie banks Anglo Irish and Irish Nationwide at circa 3.5 per cent interest for a year, are currently offering higher rates of interest than nearly every other Irish bank (Nationwide UK offers 3.6 per cent fixed for three years), only because of our bailout.
Both have spectacular levels of debt and are generating no new business. In effect, you are now subsiding your own return.
Meanwhile at the end of next September the 100 per cent guarantee on all deposits in the six Irish banks runs out.
The guarantee will either be renewed by the Government or revert – perhaps – to the pre-October 2008 guarantee of €100,000.
I suggested to both my young and old friends that, if for no other reason than to avoid administration hassle, perhaps they should first choose a bank that will hopefully still be around in a year or two.
Given that the full guarantee may disappear next September they probably shouldn’t want to leave more than €100,000 in any single account.
For my money (or more importantly, for theirs) they should check out genuinely solvent deposit-takers – RaboDirect, Nationwide UK Ireland, the Leeds and the best credit unions.
Two of the other high street bank may be struggling with high levels of property debt, but they do have strong parent companies: NIB has Danske Bank and the Permanent TSB is supported by Irish Life.
Heavily indebted Ulster Bank is part of Royal Bank of Scotland, which has been nationalised and is 84 per cent owned by the British government; RBS reported further losses of £3.4 billion for 2009.
An Post, meanwhile has no liabilities of its own since it offers no loans, and all deposits are and will continue to be 100 per cent guaranteed by the state…which of course is heavily indebted.
A confirmation party isn’t really a place to be discussing savings and investments, but I am going to send my two flush friends each a copy of Permanent TSB’s excellent new guide to savings and investments, edited by Margaret E Ward.
This is a user-friendly and beautifully written little money guidebook – just as I expected: Margaret runs her own communications company called Clear Ink.
It also gives an honest account of how our economy became derailed during the (ka)boom years and in a fairly upbeat tone lists the steps that are being taken to address our immense problems.
I congratulate her for being able to condense NAMA into a few short, pithy paragraphs that even an 11-year-old will easily understand (so that he too can question the wisdom of its creation).
I think my two friends, flush with cash as they are, and in need of a little more information, will find the PTSB’s guidebook book useful.
It’s mostly about saving and investment options – and even lets three real people tell their own money stories – but it also dips into the need for good protection insurance, pension and inheritance planning.
For a free copy, just stop in at your local Permanent TSB branch.