Financial advisor Ralph Benson of Moneycube.ie shares his top tips for saving money in Ireland.
Being good with money needn’t create drama. It’s about establishing regular positive habits that set you on the right course over the medium term.
Here are seven habits for success:
1. Jump on in
Successful savers get stuck in. It’s all too easy to push saving some cash into next month’s payslip. There are lots of demands on our money, so make sure to pay yourself first. When income lands in your current account, before you do anything else, put some away in regular savings.
And however small, first means first: before your housing, food or other costs.
2. Keep it regular
The most sustainable approach is to establish a small, regular habit now, and build it as you go. The alternative, deciding month-to-month how much you’ll save, requires more discipline, and you’re more likely to give up or save less.
So set up a regular deduction from your main bank account.
3. Bucket your money
You’ll be much more motivated once you picture what you’re saving for. Most of us have short, medium, and long-term savings needs. Save for them separately.
Christmas, for example, is a short-term bucket. An instant-access deposit account at your bank is the obvious place.
Other needs might be two or three years away. Home improvements or a house deposit, changing the car, and big holidays are all in this category. For the medium term, it’s much more important to get a return on your money, and you can calculate how much you’ll need to tuck away monthly so the bucket is brimming when you need it.
Other needs are less urgent, but still important. That includes your pension, paying off your mortgage, and building your overall wealth. Here, a regular habit is still vital – and taking some risk with the money in search of long-term growth is probably sensible.
4. Check in on interest rates
The days of near-zero returns are gone. True, some banks still pay derisory interest rates on deposit accounts. But European rates are now 2.5%, and likely to rise over the coming months.
Look for a deposit account that is paying a more reasonable return. There are plenty of online comparison sites, and most include options available across the Eurozone. You’ll still benefit from the Eurozone-wide €100,000 deposit guarantee.
If you’re sitting on a lump sum, it’s particularly important to look at options to improve your return. Inflation has risen in the wake of war in Iran. At an annual rate of 4.1% in September, inflation is eroding the value of your cash.
5. You need a rainy day fund
Everyone needs to prepare for the unexpected. An emergency fund you can access when you need it most is probably the most important savings goal you can set yourself.
This cash needs to be accessible fast, and very low-risk. The rule of thumb is that between three and six months of after-tax income is about right. That will give you the breathing space you need, say, to pay immediate bills, cut your spending, and find a new job if you needed to.
Remember, you don’t want your fund to be too easy to access. Not all big costs are emergencies! For example, your car insurance might be expensive, but you don’t want to be digging into your emergency fund to pay for it.
6. Get ready for July 2027
The government has announced that from the second half of next year, we’ll all be able to place €12,000 a year into a personal investment account, which will be free of tax until the balance exceeds €50,000.
For most of us, this is a decent opportunity to build investment wealth, but it might take time to assemble the cash. Think now about how you can get ready to use the new scheme.
7. Increase and diversify as you go
Lastly, successful savers and investors increase the amount they save as their income grows, and diversify their risk by investing in numerous kinds of assets.
If all your wealth is tied up in the Irish housing market, or sitting in cash in the bank, for example, now might be time to make a change. Fill another bucket.
You could increase your savings by moving banks for better rates, or diversify some of the risk by investing money in global markets.
Once these good habits are in place, you can build further, for example by growing your pension, accelerating mortgage repayments and all the other practices that increase your financial resilience.
Ralph Benson is head of financial advice at online investments and pensions advisor at Moneycube.ie.