MAKING CENTS: Want to save? Shop around for the best interest rates.

When it comes to savings and deposits, there is an impression at the moment that interest rates are so low there is no real incentive to save and shop around for rates, writes Gráinne McGunness
MAKING CENTS: Want to save? Shop around for the best interest rates.

It is true that rates are at a historic low and have been for some time and also true that Dirt tax of 41% nearly halves the interest that you do earn. But there is still enough variation for it to be worth shopping around for the best home for your money.

If you are looking to save regularly, there is a wide disparity of interest offered by the major Irish banks, from 1.25% up to 3.5%. The highest rate is courtesy of KBC for amounts between €100 and €1,000, but there are strings attached. The 3.5% rate is only available to customers who have a KBC current account and set up a monthly standing order to the Regular Saver. Otherwise KBC offers a much less attractive 1.5%. There are no restrictions on either version of the account; you can make withdrawals whenever you choose.

The next best interest rate available is 3% from EBS for its Family Savings Account but this account comes with withdrawal restrictions. Customers save between €100 and €1,000 per month, with flexible deposit amounts allowed, and must leave the funds in the account for the first 12 months. At the end of the year you have the option to withdraw all or part of your funds and/or continue saving for another year.

Nationwide UK (Ireland) offers 2.5%, AIB 2%, Bank of Ireland (BOI) 1.35%, Permanent TSB 1.25% and Ulster Bank 1.25%. They all have broadly similar terms, although Bank of Ireland permits monthly savings of up to €2000 and requires seven days notice for withdrawals.

A newly-introduced product that may have caught the eye of potential homebuyers is Bank of Ireland’s Mortgage Saver account. Its chief selling point is a bonus of 10% of the highest balance when you draw down a mortgage. You are permitted to lodge up to €20,000 in a lump sum plus save up to €2,500 per month for two years. It sounds very attractive but customers should do their maths before choosing this option.

Customers who avail of this deal cannot also claim the bank’s offer of 2% cashback on mortgages for first time buyers (although this is due to end in September). House buyers should also always focus on the rate of the mortgage, lower interest will be worth more in the long-term than introductory offers.

When it comes to lump sum deposits, interest rates are dependent on the level of access you need — the longer you can put the funds away for the better, but even with that rates are low. Interest rates for notice deposit accounts or easy access accounts are between .25 and 1%. Even rising to three or four years, the best rate from a bank is KBC’s 1.1%.

For longer terms bank of Ireland offers a rate of 1.25% AER on its 7 Year Growth Deposit Account, which works out at 9.07% gross over the full term. It also has five and six year options. If you do have funds that you can do without in the medium to long-term, you should consider the various state saving products, administered through An Post. These are competitive over the longer terms, not least because the interest is free of Dirt. The 5 Year Savings Certificates offers a return of 5% return after 5 years (AER 0.98%) while the 10 Year National Solidarity Bond currently on offer will provide a 16% return on your investment after 10 years (AER 1.50%).

Customers looking for higher rates of interest would have to accept some element of risk and look at investment options. Speak to a broker aboutunit-linked funds, shares and the stock market.

With rates so low, another option is to roll the dice and put some lump sum savings in Prize Bonds. With these, no interest is paid to bondholders. Instead the interest (currently 0.85%) is paid into the monthly prize fund, to be distributed to winners in the weekly draw. There are four €1m prizes per annum and thousands of weekly prizes; all of which are free from Dirt if won.

DEAL OF THE WEEK

Argos is doing their bit for cash-strapped parents, with a range of back-to-school offers on sale at the moment.

For young scholars starting out they have character backpacks, some with matching umbrellas, available from €13.99. Peppa Pig, Finding Dory and the ubiquitous Frozen are all available.

There are larger branded backpacks and messenger bags for older students from around €20 and also sports and lunch bags.

A range of computer and audio equipment aimed at older pupils is also included in the back-to-school offer, with tablet prices starting from €74.99. Bush Spira 7in 32GB tablet looks great value at €119.99. 32GB of storage gives you loads of room for apps, music and maybe even some school projects.

Argos has also included a range of art supplies, ranging from basic Crayola kits for younger children up to portfolio cases and more advanced equipment for second-level art students.

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