Saving abroad will help you make the most of your money. Nowadays, many banks offer the possibility to EU non-residents to benefit from their products. As long as you invest in another EU country, you will benefit from the EU protection scheme of deposits and you can benefit from higher rates than in you domestic country. Still, you won’t make the most of your money if you don’t choose the right product. Here are some ways to make sure you’re choosing the right product, at the right price.
Only focusing on the advertised rate is a common mistake. When considering a product, you should not forget about the fees. Furthermore, the advertised rate can be a bonified rate for a period lasting only few months. This attractive rate will often rise dramatically once you pass the initial period.
Taking into consideration interest rates for deposits redeemable at notice of up to three months in any European currency over time, savers across European countries profited from around 2% in 2003 to 3.5% at the end of 2008. It then fell sharply, to 1.3% in mid-2010, recovering slightly in 2011 before falling again to its historical low of 0.7% in mid-2015.
A study published by INSEAD OEE Data Services and ordered by The European Consumer Organization called “Savings accounts in Europe: A dormant market?” stated that to make the most of your money, you need to switch countries regularly. Over the period 2003-2015, a saver looking for the best interest rates would have to move his savings to 13 different countries. In order to always benefit from the best rate, you would need to switch countries over once a year.
To know whether it is interesting or not to switch countries, one should take into account the range of interest rates, which measures the potential gain a saver in the country with the lowest average rates would get from investing in the country with the highest rates. This indicator peaked in 2007 at 7%, before decreasing in the early 2010s and then falling dramatically the last two years down to 1.5% in December 2015. This means that even if one country starts to offer a better rate than the one where you placed your funds, you would not earn much more by switching countries.
Looking at a set of 7 countries (Belgium, Germany, Finland, France, Latvia, Netherlands and Slovakia) for which data were available, potential gains per year in this group were estimated from 7 bn€ to 18 bn€ for the deposits redeemable at notice of up to three months.