How monetary funds and paid accounts work, a savings alternative
Spanish banks are not responding and continue not to transfer the remuneration they receive for the money they place in the European Central Bank (ECB) to their clients’ deposits. In fact, the rate the agency pays on balances is currently at 3.75% after the cut at the June meeting, according to Help My Cash.
“An interest that is still not reflected in the fixed terms of the deposits of Spanish banks,” says Olivia Feldman, economist and co-founder of the financial comparator HelpMyCash, who recalls that, according to data from the Bank of Spain, in April “the interest offered in new operations deposits stood at 2.53% on average and fell to 2.48% for one-year fixed terms, while the ECB paid 4%.”
Best savings options for Spaniards
In this context, according to the Bank of Spain, 40% of citizens save in cash. “Citizens may be afraid of losing their savings, but they do not realize that by keeping money under the mattress or in a piggy bank they lose purchasing power due to inflation,” warns Feldman.
That is why there are other alternatives that HelpMyCash explains to us: if you opt for the best one-year Spanish deposits, they maintain returns around 3%, “although the highest rates are found in terms of 3 and 6 months, with interest of up to 3.50%,” explains Feldman.
Instead, European bank deposit yields rise by up to 3.60%after having fallen since the beginning of the year to adapt to the ECB’s rate cut this June, but no major decreases are expected in the coming months, since “everything indicates that the rate of decreases will be less intense than that of increases In fact, we estimate one more cut in the latter part of the year,” continues Feldman.
What is a monetary fund?
Monetary funds are low-risk investments that place money in very short-term fixed income. In simple terms, a monetary fund invests in a diversified portfolio that includes treasury bills, promissory notes, corporate bonds, and bank depositsamong other assets.
Furthermore, “although the ECB has cut the price of money by 0.25%, it is still at high levels compared to two years ago, when it was at 0%,” recalls Feldman. “And with the money always at hand,” he adds.
Monetary funds are ideal for:
- Conservative investors: Monetary funds are ideal for making money profitable without exposing yourself to the volatility of the stock market.
- Beginners looking to invest without taking on much risk. Monetary funds allow you to understand how an investment fund works before venturing into higher risk products.
- To control volatility in times of uncertainty. If you invest in the stock market, you can reduce volatility by moving part of your money to a monetary fund.
- To avoid taxes when changing funds. When you withdraw money from an investment fund and deposit it in your account, the Treasury will retain at least 19% of your profits. If you transfer the money to a monetary fund, you will avoid this withholding.
- As an alternative to deposits or remunerated accounts. Monetary funds usually offer more profitability than remunerated accounts and allow you to withdraw money at any time, unlike deposits that require permanence.
What is a paid account?
Remunerated accounts offer interest on the money we deposit in them automatically and allow us to save: more importantly, they allow us to save; It provides liquidity at all times, allowing us to withdraw money without penalty.
“There are some on the market, like the one from Trade Republicwhich replicates the interest rate of the deposit facility and with total liquidity, but the saver must know that the bank can change the profitability when they consider it appropriate,” concludes the co-founder of HelpMyCash.
