How to Boost your Savings

Banks in Spain currently offer very low savings rates, and some banks don’t offer any interest at all. But why should your cash just sit around not earning anything? Now’s the time to think about how your money can work harder for you, check out our tips below.

#1 Change bank / open another account (in Spain)

If you’re not happy with your savings rate, look for a higher-paying account with another Spanish bank. And if you’re not happy with your bank in general, consider changing both your current and savings accounts.

Many banks, especially those that are online-only, will offer a reasonable introductory savings rate for newbies. Take into account that this rate will be limited to the first six or 12 months and, in some cases, the amount of money that receives interest may be capped (for example, only the first 10,000€).

It’s essential to put your money in a bank that is part of the Deposit Guarantee Scheme where your savings are protected up to 100,000€ per person per entity. However note that some financial institutions belong to the same banking group and you’re only protected once.

Pros:

  • You’ll get more interest on your savings.
  • You may get better customer service.
  • If changing your current account also, EU regulations mean that your new bank will swap over all your direct debits free of charge.
  • You may pay less commission on your accounts and cards.

Cons:

  • You’ll have to search for the best rates. Use a couple of online comparison sites to save time.
  • You’ll have to provide paperwork, which can be time consuming.
  • Occasionally some direct debits may not be swapped over. To avoid problems don’t close down your old account immediately.
  • Once an introductory rate has ended, the normal interest rate may be no better than what you had before.

#2 Open a savings account in another EU country (in euros)

Accounts in other EU countries can offer higher interest rates than in Spain. With online banking there’s no need to travel to open an account, however not all banks have their website in other languages.

Pros:

  • It’s easy and quick to open an online account.
  • For EU entities your savings will be protected up to 100,000€ per account holder per entity.
  • With a higher interest rate your money will grow faster.

Cons:

  • If the interest rate is not guaranteed it could change at any time. You could end up opening an account abroad to find a few months later that your money receives less interest than in Spain.
  • The Deposit Guarantee Scheme may work slower in other countries. This could mean that, in the case of insolvency, you would take longer to get your money back.
  • With banks in other countries it may be more difficult to carry out due diligence to know whether the bank is reputable. It’s essential to check that the bank is covered by the Deposit Guarantee Scheme: just because it’s located in an EU country doesn’t always mean it’s part of the scheme.
  • If there’s no tax agreement between the country where you deposit your money and Spain, you may end up being taxed twice on interest earned.
  • Any deposit abroad of over 50,000€ must be declared to the Spanish Tax Office.

#3 Open a savings account in another country in another currency

Although a more risky option, it may be a way to earn higher interest on your cash. 

Pros:

  • You can search for the highest interest rates with reputable institutions.

Cons:

  • Outside the EU your money won’t be protected by the Deposit Guarantee Scheme. In the worst-case scenario you could lose everything.
  • You’ll have to pay commission to convert euros to your chosen currency.
  • Changes in currency rates may wipe out interest earned.
  • Any deposit abroad of over 50,000€ must be declared to the Spanish Tax Office.

#4 Invest via an automatic investment platform (in Spain)

Many people are wary of investing and in Spain there have been lots of financial scandals over the last two decades.

Automatic investment platforms, or “robo advisors” as they are know, can be a good option for conservative investors who are looking to put in smaller amounts regularly over the long term. These investments are cheaper than other types of funds as they are use algorithms rather than a personal fund manager. Search online for “robo advisor” to find different options. You could also consider index-linked funds in Spain too, available via your bank.

Pros:

  • You don’t need to understand a lot about investing, although you will be asked about your appetite to risk.
  • It’s easier to diversify your savings, as you don’t need to invest large amounts.
  • Commission rates are lower that specialised investment funds.
  • It’s a passive way to invest.
  • You can invest from as little as 50€.

Cons:

  • You can’t personalise your investment portfolio.
  • Even though commission rates are low, they’re still higher than a DIY version.
  • As with any investment there’s always a risk. Remember that it’s only advisable for long-term investments that can ride out the ups and downs of the market over time.