One of the most important skills to learn as you grow older is how to manage your money.
While we love a bit of a splurge now and again, it makes no sense to work hard all week and leave yourself with nothing to show for it so putting away a few quid each month really is worth the sacrifice. There are many ways to start growing that rainy day fund and it can be a little confusing so we've put together a little step-by-step guide to setting up a savings account. Now, all you have to do is start filling it up!
1) Decide what you can afford to save each month
Being consistent is the key to building up your savings so choose a realistic amount that you can afford to set aside each month. To do this, make yourself a monthly budget outlining all your incomings and outgoings and decide on the most suitable figure for your savings. Even putting away €100 each month, or €25 a week, will give you over €1,200 by the end of the year, in addition to some possible interest.
2) Set your goals
What are you saving for? Are you hoping to afford a holiday later in the year or are you aiming to apply for a mortgage? Do you need to access your money or are you planning to leave it in the account for an extended period of time? Figuring out all this information is vital to make an informed choice on where to save your money as different accounts offer different benefits.
3) Choose your account
An Post, credit unions, banks and building societies offer
deposit accounts, which accrue interest on your savings. According to the
National Consumer Agency, 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.
Interest rates on savings and deposit accounts may be either fixed or variable. With a fixed interest rates, the rate will stay 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. These rates usually apply to accounts that require you to leave your money in the facility for a set period of time and you may forfeit some of your interest if you withdraw early.
With a variable interest rate, the rates can fall or rise when interest rates change. If rates fall, you earn less interest on your savings. If rates rise, you earn more. Most variable rate accounts allow you to withdraw your money immediately, so you can always switch your savings quickly if you see a better rate on offer. You may have to pay Deposit Interest Retention Tax or DIRT on any interest you earn on savings and deposit accounts. You can get more information on the Revenue website.
With so many banks and products, it can be very difficult to know where to start but the National Consumer Agency's website at www.consumerhelp.ie does a lot of the legwork for you. This handy
gadget allows users to compare different offerings on savings accounts, credit cards and mortgages - just don't forget to read the small print!
The
National Treasury Management Agency (NTMA) also offers a range of savings products, including deposit account and saving bonds, which are available online at StateSavings.ie or through An Post branches.
Credit union savings are usually held in share accounts but some also offer deposit accounts. 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.
Credit unions are provide services and loans for their members and are usually based in a community. 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 or be a member of a professional body that runs its own credit union. You will need to become a member to open an account and you will usually be paid 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, but many find it easier to get loans from credit unions than conventional banks.
4) Open your account
Many banks now let you open your account online but you can also do this by popping into a branch and filling out some paperwork. You will need to present some information, including proof of identity (passport, driving license, Age Card, government documents, or identification form with photo signed by An Garda Siochana), proof of address (utility bill, insurance policy, documents from Revenue or a letter from your employer) and your PPS number. See more information
here.
5) Get saving!
Once you've set up your account, you will be able to lodge money in person or online (in most cases). If you find that you are likely to spend the money before you get time to lodge it, it may be worth considering an automatic transfer or standing order for the day that you get paid. Out of sight, out of mind!
