Building saving has lost its attractiveness. The amount of the premium state has been declining in the long run and the underlying interest rate is also falling. It has already fallen to 1% pa In addition to obtaining the state premium, it will be necessary to invest a relatively high amount in 2018 for building savings. Who will pay the building savings in 2018?
Low basic interest and a high contribution to obtaining full state premium weakens building savings significantly. If we tie the funds together, it is a huge disqualification on the market.
However, Slovak savers are too conservative. Despite the fact that building 2018 will bring them only minimal appreciation compared to the past, it is still popular. People are attracted by low interest and low premium state. The price for this is the loss of revenue.
How are you doing? Are you still saving in building savings? To get more than what building offers offers, read this article to the end. In the article, I consider building savings from the perspective of saving.
Building savings interest fell to 1%
It’s a disaster. This is what most people care about how much they earn their money.
Building societies are currently offering a basic interest rate of up to 1% for new contracts (as of 27 August 2017). It is very likely that building 2018 will be just as bad. If conditions change, I can update them in this article. We will be surprised what the building society will prepare for us.
There are 3 building societies in Slovakia. When you close a building savings scheme, you will get the same conditions for obtaining the state bonus everywhere. They are usually also vary in the amount of interest they give you on building savings and other conditions such as fees and various benefits.
At the moment of concluding a new building savings contract, you can obtain such current interest rates (as of 27 August 2017):
- First Building Savings Bank 1% pa
- Wüstenrot stavebná sporiteľňa 1% pa
- ČSOB stavebná sporiteľňa 1% pa
It’s a misery. Not only is it difficult for you to read, but it is hard to write to me. Where are the times when building societies offered 3% pa interest in building savings? Unfortunately, the time has changed and conditions have changed. 2018 is unlikely to bring anything revolutionary in building savings.
It is true that, compared to unbound bank deposits, where interest is just above zero, building savings are still quite good. However, building savings carries a bond of money for 6 years.
And in that case, if I compare building savings to eg. with regular investment in mutual funds for 6 years, building savings from the perspective of revenue are playing on the full line and not only in 2018, but also in previous years.
The 2018 State Building Savings Bonus will continue to be 5%
The 2018 state premium will be the same as in the previous 2 years. It can no longer fall below. In 2018, it will be 5% of the deposit, to the maximum of € 66.39, and you will have to pay a minimum of € 1,327.80 to get the full state bonus.
I’m bringing a little insight into the past. In this way, the state premium and deposit to develop a full premium in the past up to 2018.
Source: author’s conversion
Whatever it is, it is better than what building in 2019 is waiting for.
Who will pay the building savings in 2018?
It is a bit of a hard-headed subtitle. I’m aware of that. Nevertheless, building savings still has its place on the market and will find its place among conservative investors. It is better to save yourself with a minimum return than to spare yourself at all. In my view, building pays off to a person who:
- Requires bank deposit guarantee
- will be satisfied with a basic interest of 1% pa
- can deposit € 1,327.80 for the full state premium in 2018 and exactly the same amount in 2017,
- accepts the commitment of funds (6 years).
Who is not worth the building savings in 2018 at all?
It’s just the opposite. In most cases, building savings do not pay for you in the following cases:
- you require a higher return than the building
- you do not require a bank guarantee at the cost of low revenue
- you do not want your money bound for 6 years and you want to have it more liquid,
- you want to deposit less than the minimum deposit to the full state premium, ie € 1,377.80 per year.
In most cases, it is better for you to prioritize appropriately selected mutual funds before building savings and not just in 2018.
In the latter category, I am also. I have been building savings for many years. I gave up. After finishing the building savings I decided not to build any more under these conditions. And in 2018 I will certainly not make an exception.
I wrote about where I value my money several times, eg. in this article on mutual funds.
Mutual funds earn more than building savings in the long run
Nothing can be done. If you want to earn more than building savings, it’s time to leave building savings or classic banking products.
Recovery in bank deposits is very difficult to overcome average inflation. Mutual funds earn more than building savings in the long run. This is a development of the value of 10 funds. There are equity funds and there are bond funds from different administrators. All of them earned more than any building savings, despite the fact that the markets hit relatively large declines due to the crisis.