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 lump sum of money that you’re happy to put out of reach for a couple of years.

And, unlike savings, there’s no guarantee with investments – so you could end up losing money, or not making an awful lot.

Generally it’s about balancing risk and reward with this kind of thing – if you want the best chance of making a great return, you need to make riskier investments.

If you want to be sure you don’t lose money, you’re going to have to go with something that promises fairly modest returns.

Take, for example, a 10 Year National Solidarity Bond– which is 100% guaranteed by the State.

If you put €1,000 into that today, in 10 years time you’ll get back €1,100.

And with the current rate of inflation…

The is the problem facing all people saving at the moment – they’re getting little or nothing for their money, and the value of that money is being whittled away by the month.

For example, if you put that €1,000 into your savings at the start of the pandemic, in terms of buying power, it’s now effectively worth less than €890 because of inflation.

The rate of inflation is expected to tail off over the next year or two – but it’s still going to be higher than desired, which means your money is slowly losing value while it’s earning you nothing.

So what other options do savers have?

Well, they could spend the money – though due to inflation there’s not much value to be had, especially if they were thinking of doing something like a home renovation or upgrade.

People may also be unwilling to let go of their savings at the moment, for fear that they need it to fall back on if their household budgets get squeezed even further, or if there’s another economic downturn that threatens their income.

And the general personal finance advice is to keep a certain amount of cash to hand at all times – just in case your income suddenly stops, or the washing machine breaks down.

So using up all of your savings isn’t a good idea either way.

But assuming you have money beyond that recommended buffer, paying off debt is probably a good use of money at the moment, especially if it’s high interest lending like on a credit card.

The most recent Central Bank statistics tell us that household debt stood at €128 billion late last year – so not too far behind what we have saved.

If people have the money to clear some of that, it might mean reducing or even wiping out a loan repayment altogether, which will bolster their monthly budget as they head into the winter.

In fact, even if you’re just paying off a part of a loan – like your mortgage – it will ultimately stand to you.

Another option is to put money towards a pension.

For many this is about as long-term of an investment as you can make, but we do know that a lack of pensions provision is a major issue in Ireland, and it takes a long time for people to build up the kind of pension pot that they would like to have a comfortable retirement.

Is there any way for the Government to tap into those savings?

Well it kind of does already – for example, any interest earned is liable to Deposit Interest Retention Tax – or DIRT – at 33%.

Though, given that people haven’t been earning much on their savings for the past few years, there isn’t really much money to be made from that tax at the moment.

The State Savings scheme, including things like the National Solidarity Bond and Prize Bonds are effective an attempt by Government to benefit from people’s savings, too.

That’s because they’re effectively a way for the State to borrow citizens’ money for an extended period of time, which they can then use for various investments and public services.

Beyond that, though, the Government is actually in a bit of a bind when it comes to people’s savings.

Normally if you were looking at businesses around the country struggling on the one hand, and billions and billions sitting in savings accounts on the other, it would make sense to try to come up with a scheme to try to unleash that cash in order to help businesses out.

Think of some kind of reverse SSIA scheme that incentivises spending rather than saving.

But, if you were to do that, you run the risk of simply adding to the inflation problem at the moment – which would only prolong the pain that consumers and companies are facing right now.

So, as counter-intuitive as it seems, the Government probably doesn’t want too much money coming into the economy right now.

In fact, that’s partly why a central bank raises interest rates when it wants to cool economic activity. Because higher interest rates on your savings account – in theory at least – encourages you to save rather than spend.