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Personal savings are at record levels despite inflation hitting near 40-year highs, new figures have revealed. Deposits grew by the largest amount in 15 months in October 2022, increasing by €1.6bn over the month to a staggering €149bn. Year on year, household deposits increased by over €8.1bn, or 5.8%, according to figures released by the Central Bank.

A Central Bank Money and Banking Statistics report said: "The percentage of deposits held in overnight accounts now stands at 94%, the highest proportion since the series began. A decade ago, this ratio stood at just 50%. Most savings are held in current accounts as the low interest banks pay on deposits means there is little point locking cash away for long periods.

In recent months interest rates for borrowers have been aggressively increased by Central Banks globally which has seen banks slowly increase interest rates offered to savers. However, these savings rates are subject to DIRT tax of 33% and therefore will not keep pace with inflation.

Institutions offering deposit account facilities remain well capitalised and they seem unwilling or perhaps in many cases unable to pay interest to savers. These deposit-based accounts are protected by the State Deposit Guarantee scheme, but this seems the only reason to keep your money in a short term or demand account.

COVID lockdowns followed by sharp increases in living costs have either restricted our spending options or scared us into tightening the purse strings, increasing the money held by some households.

If we are now more focused on retaining higher levels of savings, would it not be sensible to make your money work for you?

Unit linked savings offered by Life Assurance Companies are an alternative investment option that have the potential to significantly increase your savings over the long term. However, because these options carry an element of risk and do not guarantee capital or the returns available, this can worry people.

If you want the potential to earn a good return but reduce the risk associated with these investment funds, a Regular Savings Plan can be the ideal solution. You can move money monthly and average out the cost of purchasing investment units. If the chosen investment fund suffers a period of negative performance, you will be purchasing more units with the same monthly premium and over the savings period the higher and lower cost of units is evened out.

These savings plans should be viewed as a longer-term option, ideally 5 years or longer. However, your savings can be accessed if you need money and the funds are not locked away. You can start saving as little as €100 per month and you can control the contribution levels, allowing you to increase or reduce the amount you put away each month as required.

A Zurich Life study has shown that regular contributions of €300 per month invested in their Balanced Fund for the last 15 years would have delivered cumulative returns of over 88%, compared to a negative return if invested in their Cash Fund. These returns have simply not been achievable with a bank deposit account.

There are several savings contracts available with a wide selection of funds which cater for most attitudes to risk and Zurich says in a 10-year period the odds of equities posting positive returns is 96%.

If you are considering starting a savings plan, an impartial Qualified Financial Advisor can help you choose the most suitable option. The policy and investment strategy can be regularly reviewed and altered over time to accommodate your changing circumstances.

Robert Downes, QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor. You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on robert@jfl.ie.