Limited spending options and fears of what was to come turned Irish consumers into great savers during pandemic lockdowns.
Even as the economy reopened, the average household was saving far more of their income than before – though recent data suggests the rising prices are forcing that to change.
This means that there is a huge bulk of money sitting in Irish bank accounts at the moment – right at a time when households, businesses and politicians search for ways to cover the rising cost of living.
How much money do people here have saved?
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A huge amount – somewhere in the region of €146 billion by the end of July, according to the most recent figures from the Central Bank.
To put that into context, the upcoming budget is estimated to be worth around €6.5 billion– and that’s a far bigger figure than it would be in a normal year, because of the billions of euro that are planned around the cost of living.
So the people of Ireland have more than 22 bumper budgets worth of cash sitting in their bank accounts at the moment.
And that figure has ballooned significantly in the past two and a half years – because people saved an extraordinary amount during the pandemic.
Comparing the February 2020 figure with the July 2022 figure, there’s nearly €35 billion more in our savings. That’s the kind of money it would normally take a decade or more to build up.
It works out at about €28,600 for every person in the country.
But I don’t have anything like that in my bank account…
Unfortunately, all of that money isn’t very evenly distributed.
And, unsurprisingly, it’s the country’s higher earners that tend to hold the bulk of the money saved.
It should be said that most people in the country do have some level of savings – recent figures from the Central Statistics Office says that nearly 97% of households have some form of savings.
But the amount in those savings accounts tends to decline in line with the amount of disposable income a person has.
There are also links between the likelihood of having savings and your level of education, and whether someone is living in their own house or whether they’re renting.
And that inequality in savings was only enhanced by the pandemic.
If you were to take two types of workers – let’s say, a high-earning tech worker, and regular retail worker.
There’s already a huge difference in their earnings here – but when the pandemic hit, the tech worker was able to continue doing their job from home, pretty much with no interruption.
That means their earnings stayed the same, in some cases they actually increased, and because they couldn’t go anywhere, suddenly all of their socialising money started building up in their bank account.
The retail worker also wouldn’t have had much available to spend their money on, but because they were forced to stop working altogether, and put onto the Pandemic Unemployment Payment, they didn’t have much in the way of disposable income left once their bills were taken care of.
Are we still saving our money?
As the economy began to reopen, there was lots of discussion about what might happen with all of the savings built up during the height of the pandemic.
There were some – particularly retailers – who hoped that there might be some kind of post-lockdown spending spree.
Consumer spending did rise – and some people seemed to put their savings towards some big ticket items, like a trip abroad. Some of the rapid rise in house prices has also been attributed to people directing their savings towards a deposit on a new home.
But while spending has been higher than before, it’s definitely not been the splurge that some had expected.
In fact, so far it seems as though people have continued their savings habit even as life returned to normal.
The most recent Household Savings stats from the CSO shows that people were still putting away almost 20% of their income in the middle of the year.
That’s about double the pre-pandemic average.
Perhaps people realised that they were able to save more than they previously thought possible – or perhaps it shows that households are remaining cautious, particularly given the context of the war in Ukraine and talk of a recession in the Euro Zone.
It should be said, though, that these CSO figures only bring us to June – before the cost of living crisis really started to bite.
A more recent survey from the Bank of Ireland shows that people are now saving less than they feel they should, because they simply can’t afford to.
So if we’re not spending it, what options do savers have to get the most out of their money?
Well, if they’re looking to save it – there’s not a lot on offer at the moment.
Across the board, savings accounts are offering next to nothing in terms of interest – and that’s been the case ever since the European Central Bank dropped its interest rates to zero.
ECB interest rates are on the rise but so far the main Irish banks – outside of tracker mortgages – haven’t yet passed those on.
That’s good news for those on a variable mortgage, or someone with a personal loan, but it’s bad news for savers, because it means they’re not yet benefitting from the interest rate.
For those looking for a return on their money, investments are of course an option – but only if you have a…
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