Spring Clean your Savings this Easter!

With the arrival of Spring on our doorsteps, all of those new years’ resolutions we made at the beginning of January seem so far away! If like many of us, you have not kept to all or some of them – then fear not – there is still plenty of time to make up for this! There’s certainly no need to beat yourself up about it and as the saying goes - It’s better late than never and what better time to put them into check than now.

Money saved is money earned!

There is a lot of truth in the well known saying “Money saved is money earned” and people should be encouraged to save from an early stage. The terms “savings” and “investing” are often used interchangeably as if they were all but synonymous. The fact is they are quite different! Getting a hold of the difference between saving and investing is the key to managing your money more effectively.

In modern times Irish people have been keen savers, more so than our counterparts in the UK or America. Indeed, Ireland’s average household savings have been increasing over the past year or more as people have become more confident about saving and investing money with the future in mind. Over the last number of years, Ireland has enjoyed a historically low interest rate environment, which is good news for tracker mortgage holders but is not so good for deposit savers.

Currently money held on deposit (e.g. in bank deposit accounts) is earning little or no interest. The question you should ask yourself is whether you want your money to work harder? A regular savings plan, investing in a unit linked fund is an alternative worth looking at in Spring 2022. Typically, these type of plans give you access to your money at any time without penalty and you have a choice as to where your money is invested together with how much investment risk you wish to take.

Saving Explained

Saving is storing money safely, such as in a bank, credit union or with say An Post, for short-term needs such as upcoming expenses or emergencies. When saving money, the primary emphasis is on the principal rather than return potential. Typically, you are sacrificing the potential that your money may grow strongly for a relatively low return and reasonably easy access to your funds. The appealing feature of saving money is that you are given certain guarantees such as the fact that your balance will never go below the principle and that you will get a steady, predictable interest rate. The downside is that your interest return may not keep pace with inflation, and you may find that in real terms your funds have actually been eroded over time.

Investing Explained

Implicit in investment, on the other hand, is that you take a risk with a portion of your money for what you hope will ultimately be a much better return than you could hope from savings. Investments are longer-term in nature and are tailored to meet your chunkier financial needs into the future, say for educating the children, trading up into a better house or just so as to make life that bit more comfortable as you mature. The attraction of buying into an investment is that you have the chance to make a decent return that is well ahead of inflation, albeit with some risk. However, without some risk there can be no reward! Investing is the key to meeting your long-term financial goals.

If you find yourself in the fortunate position of having a surplus of income over outgoings every month, by speaking to a financial advisor you can explore ways to maximise this money’s potential and make your income secure. Equally, your advisor can also suggest ways in which you can reduce your outgoings yet still protect your lifestyle and help you develop surplus income each month.

Conor Murray

CMCC Financial Solutions

April 2022