Alternatives to Savings Accounts for 2018
Hello and welcome to this special
episode of bonkers.ie TV. Savings rates are at an all-time low in Ireland and
many of you may be questioning the traditional wisdom of putting your
hard-earned cash away with one of the banks, where it’s likely to gather more
dust than interest these days. Here to talk about Ireland’s low savings rate
environment and to discuss some of the alternative places to put your cash in
2018, I’m delighted to be joined by CEO and founder of Moneycube, Ralph Benson.
Ralph, you’re very welcome. – Thanks Mark, great to be here.
– So, as mentioned Ralph, savings rates are incredibly low in Ireland right now, why is that the case?
– Well, Mark we’re still working through the aftermath of the financial crash ten
years ago when central banks and governments flooded the market with
cheap money and effectively the situation is the banks don’t really want
our savings and therefore aren’t willing to pay us a big premium for minding that.
Now, for a long time people have been saying that situation will change and
interest rates will rise but don’t bet on it. We’re still waiting and if
anything the situations got worse over the last 12 months.
– Okay, so how are Irish consumers reacting to this low savings rate environment, where there’s very
little interest to be earned? – Well, 10 years is certainly plenty of time for
the message to sink in and, you know, a lot of people have now realised that, you
know, the longer they leave their money on deposit, the inflation is eating away
at that and reducing the buying power of of their savings. And I guess people are
realising that in the world of finance risk and reward are connected. So, if you
want to increase your potential for a reward, you need to take some risk with some of your savings in order to drive up the return on that. – And I think we’re seeing a greater appetite for some element of risk from Irish consumers who may have been traditionally more conservative just when they’re seeing how little there is to actually be earned on those savings accounts. So, you also consider the fact that DIRT is at 37% as well, so anything you are
earning a big chunk of it’s being eaten away by the government in tax as well,
so a tough environment. So, what are some of the alternatives available to Irish consumers?
– Well, I guess what people have seen is, you know, share prices have had an absolutely stonking run in the meantime, you know, sort of 10 plus
percent rises last year, you know, and certain indices and so on. So, that’s
catching people’s eye and what we’re finding as people are asking questions
about, you know, ‘What are the practical ways I can get some exposure to that with my money?’
– State savings, as well are another thing that’s maybe an alternative, is that correct? – That’s correct, I guess there’s a spectrum of
things, you know, and within the sort of risk-free investment area, your options
are bank or state savings. Now, state savings have one big advantage, which is
that there’s no tax on the interest you earn unlike, as you say, the DIRT tax,
which is charged on interest from banks. However, you’re not going to get
rich on the interest you earn on state savings. There are also incredibly low
rates, which reduced further last year. So, you mentioned there, the stonking run
that a lot of shares have had and how a lot of consumers are maybe becoming more
interested in that, but I think there’s a lot of barriers there are – or at least
mental barriers to consumers, where you think that investing was, you know,
traditionally reserved for people who are masters in the dark arts of
financial, high-level exchanges and so on, but tell us what would be the
first step someone could take if they wanted to get involved in investing – maybe put their toe in the water? I think, you know, the first step, really, is to
consider what you’re trying to achieve with your savings, you know? And then the
needs of somebody who’s investing over five years to build up a sizeable house
deposit fund are very different from somebody who, you know, wants to put some
money together for their summer holiday You know? So, you’ve got to start with
your end in mind and make your investment decisions based on at least a
rough financial plan around the length of time and level of risk you’re
willing to bear because there will naturally be ups and downs over the
short term. What’s important is that over the time that you invest you have the
best possible chance of getting a decent return on your money.
– Makes sense and I’m sure it’s very important to know exactly how much you
can, you know, afford to lose and, you know, by when you’re hoping to hit a certain
goal and all that kind of stuff to be prepared to maybe wait and see that
investment payoff over whatever it might be; 5, 10 years – depending on risk a
consumer expose themselves to. So, at Moneycube, Ralph, you guys make it easier
for people to get involved in investment. Tell us a little bit about how the
company got started and what you do now. – Yeah, I guess the reason Moneycube
has been formed, is the frustration at exactly what you’ve described, in that
investment should be available to everybody and we really want to break
down a lot of those barriers and make it simple for people to invest and
make it accessible for people to invest at kind of normal levels of money, so
you don’t need to, you know, have six and seven-figure sums to get involved in the
investment market if you talk to Moneycube. – Okay, excellent and tell us how
somebody who was watching this video now and wanted to maybe learn a bit more,
where could they go to do that and what would be the first steps to actually
starting to invest with you guys? – Well, through our online platform we
ask all those questions to form a view on risk and financial objectives, and so
forth, so it’s really just thinking about your risk, your objectives and, you know, kind of where you are right now. So, your financial circumstances. And very quickly, coming out of a handful of questions there, you can form a pretty good view on the right kind of investment for people. You know, there’s a
spectrum of different investment classes you know, from investments funds, which
are our specialty, and give you diversification across a number of
different underlying investments at the click of a button, to, you know, much more
esoteric investments like maybe peer-to-peer lending or crowdfunding,
which are probably less focused on a long term plan to hit certain objectives
and more maybe to try out a new product or, you know, a Kickstarter to get a
something into the market or something that you feel personally connected with.
So, there’s there’s a real spectrum in there. And, you know, it’s just working
with people ideally online, to figure out what’s right for them.
– Okay, so a lot of options there And you’re regulated by the Central Bank of Ireland which I think is probably important to make mention of.
– Correct, yes.
– Cool. Well, look, Ralph, thank you so, so much for joining us. Thank you for watching and if you have any questions about the savings
accounts and savings rates that are currently available from traditional lenders, you
can run a comparison on bonkers.ie And if you were interested in maybe putting
your toe in the water of investing and learning a bit more you can check out
Moneycube at moneycube.ie Any questions you have about this video just
leave them below and we’ll get right back to you. Ralph, thanks again and thank you for watching!