Friday, December 3

Savings blow: invest 100 times more to earn the same

The profitability of bank deposits has plunged in recent years. The monetary policy imposed by the European Central Bank (ECB), which has served the mortgaged so well, has wreaked havoc on this savings product.

In ten years, the profitability of Spanish fixed terms has fallen by 98 percent.

This is reflected in the historical series of the Bank of Spain: a decade ago, the average profitability of these products was 2.74 percent (September 2011) and a few years before, in 2008, it exceeded 5 percent. However, in September this year, it was 0.05 percent.

In practice, this reduction is a serious blow to the pocket of the most conservative saver, who now needs to invest a hundred times more than before to earn the same.

If just over a decade ago the bank paid an average of 500 euros gross for every 10,000 euros invested in a year, now the interest is reduced to five euros.

To earn the same amount as before, you would have to invest a million, explain sources from the financial product comparator Helpmycash to, who have analyzed what are the best deposits to combat inflation.

Some banks have been trading deposits without profitability for a long time or, outright, have discontinued them.

The situation is so critical that several banks already penalize savers by transferring negative rates to them or through balance custody commissions if they exceed a certain limit and do not maintain a minimum degree of connection with the entity.

The low returns on deposits have caused them to be less and less popular. Over the past ten years, your outstanding balance has been reduced by 80 percent.

Much of that money has gone to accounts, however, these products are not profitable either, so they do not serve to grow savings. A concern for many savers who see their money is not profitable while inflation soars.

Savers get poorer

The advisers cited by Inversión magazine recommend avoiding the short term, moving away from deposits and taking a prudent turn towards risky assets (image: Inversión magazine).

Many consumers saved during confinement. However, the increase in inflation and the fact of leaving savings in checking accounts without profitability is damaging the assets of some households, helpmycash experts warn.

The increase in prices is one of the main enemies of savers.

The problem with inflation is that as prices increase, savers lose purchasing power if their money does not grow at the same rate; they have less capacity to acquire goods and, in addition, their money is devalued.

That is, they get poorer. But, currently, with rampant inflation (last October it stood at 5.5 percent, the highest figure in the last 29 years) and an average interest rate on fixed terms close to 0 percent, deposits they are not capable of assuming the impact of the rise in the CPI.

The president of the ECB, Christine Lagarde, affirms that the increase in inflation is a temporary situation that will be reversed next year, hence for now she has no intention of raising official EU interest rates.

They are installed at 0 percent since 2016.

Raising interest rates would be a move that would hurt mortgages, but would presumably increase the profitability of savings products.

Therefore, savers consider starting to invest, with the risk that this implies.

Betting on mutual funds, the stock market or other more exotic assets, such as cryptocurrencies, can help avoid the effects of inflation and can serve to diversify savings. But the reality is that just as you can win, you can lose.

In addition, these assets whose capital is not guaranteed may not be suitable for those savings that will be needed in the short term or for the so-called emergency mattress, which would be resorted to in case of an unforeseen event, they point out from Helpmycash. “In these cases, the objective is usually to preserve capital,” they add.

Where are the most profitable deposits?

Those savers who refuse to give up the protection afforded by fixed terms may find better opportunities in other EU countries.

Some European banks admit Spanish savers and pay returns close to 1 percent APR, much higher than those of Spanish products, with the advantage that they are also protected by a guarantee fund.

They do not allow you to completely avoid the effects of current inflation, but at the very least they allow you to soften them and lose less purchasing power.

In addition, nowadays it is no longer necessary to fill a suitcase with bundles of banknotes and cross the border to open a deposit in Italy, France or Portugal, for example.

A few clicks online and a simple transfer (SEPA transfers are usually free at many banks) are enough.

The online platform Raisin has revolutionized this sector. With more than 550,000 clients globally, Raisin gives Spaniards access to more than fifty European fixed terms, all of them contractable over the Internet, in Spanish and protected by a community FGD.

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