Irish Savers Face €3 Billion Loss as Inflation Cuts Value of Funds

Savers in Ireland are collectively losing an estimated €3 billion due to inflation diminishing the value of their funds. This significant financial impact arises from many households maintaining savings in low-yielding accounts or in accounts that do not offer any interest at all, according to a study conducted by Raisin Bank, a German-based digital savings platform that helps Irish savers access higher interest deposit accounts.

The research indicates that the loss equates to approximately €1,500 per household, although many families in Ireland do not have any savings. Currently, interest rates on demand deposit accounts remain stagnant at an average of just 0.13%, failing to keep pace with rising inflation.

Understanding the Financial Landscape

The financial landscape for savers has become increasingly challenging. According to the Central Statistics Office, inflation reached 3.2% in the year leading up to November 2023, marking the highest rate in nearly two years. Over the last year, the average monthly inflation rate stood at 2.15%. Despite this, rates for demand deposits have remained largely unchanged, resulting in a real return of approximately -2% on easily accessible savings.

The report from Raisin highlights that this decline in purchasing power translates to an estimated loss of €730 per household for those with demand deposits and an additional €810 for households with funds in no-interest current accounts. Eoghan O’Hara, Raisin’s country head for Ireland, emphasized that active savings behavior can significantly alter these outcomes.

Savers who opted for a one-year term deposit at an average interest rate of 2.28% earned significantly more compared to those who stuck with demand deposits. Specifically, those who secured a term deposit at the beginning of 2024 earned around 17.5 times more interest than the average demand deposit saver.

Strategies for Savers

In light of the current economic climate, O’Hara pointed out that savings behaviour will be decisive in 2026. He noted that better savings offers are available, and actively comparing rates will be crucial for savers moving forward. For instance, a saver who invested €10,000 in a one-year term deposit at a competitive rate of 3.05% at the end of December 2024 earned €305 in interest before taxes throughout 2025. In stark contrast, an average demand deposit saver, even with monthly compounding, would earn only about €13, illustrating the stark difference in returns.

Looking ahead, O’Hara suggested that interest rates are likely to remain stable unless there are significant changes in the policy of the European Central Bank (ECB). He cautioned that doing nothing could lead to continued financial loss for savers. The current situation underscores the importance of being proactive in managing savings and exploring better deposit options to offset the effects of inflation.

As inflation continues to challenge purchasing power, the strategies that savers adopt now will play a critical role in preserving the value of their funds in the months and years to come.