To invest your savings, we recommend that you take the following steps to choose the right deposit:

Define your investment horizon.

As a common rule, investment advisors do not recommend placing funds on deposits for a period longer than when you may need funds.

If you know that you won’t need your money for a defined timeframe fixed-term deposit can fit your needs.

Another type of savings instrument is a notice account. It is similar to a deposit, but it does not have a predetermined maturity date. Instead of it contract includes a notice period (e.g. 30 days, 90 days). When you want to withdraw money, you will have to notify the bank. After the notice period, you can withdraw your money.

If you don’t know when you might need the money, consider savings accounts, which offer more flexibility for managing your money. Usually, you can easily replenish them (make additional deposits), and partially withdraw funds. However, for partially withdrawn funds, the rate will be usually decreased.

The most flexible accounts at disposal are demand/sight accounts. Usually, you can issue a card linked to them for daily spending. As a rule, the rates for this product are the lowest.

Knowing the investment horizon is good, but consider adverse scenarios as well.

Define the required flexibility of the deposit to take adverse scenarios into account.

Most fixed-term deposits provide higher rates but worse conditions in the case of early partial withdrawals or early termination. Carefully study the conditions of the deposit on our site and in the bank. Early withdrawal / early termination often leads to the loss of interest income and even penalty. Sometimes they’re possible only under the consent of the bank which is not guaranteed.

Some fixed-term deposits allow you to withdraw early without a penalty. Always check early withdrawal conditions before opening the deposit.

Analyze if the deposit bears additional risks.

We draw your attention to so-called investment deposits and structured products. You can find them in our market overview with a special note. They are opened when investing in stocks or other financial instruments. They can offer higher returns (not always guaranteed) but bear more risk. We recommend that you carefully study such tools and evaluate the acceptability of the amount of risk they bear.

Subordinated deposit is another type of instrument with high risk. Subordinated deposits are not covered by deposit guarantee schemes. In case of the bank failure, they are repaid after the rest of the liabilities right before the repayment to the shareholders. In case of deterioration of the bank’s financial stability interest accrual on these deposits can be stopped, and deposits can be converted to shares or terminated without repayment. As compensation for additional risk banks offer higher interest rates on these deposits.

Think about savings currency.

Generally, investment advisors recommend saving in the currency in which you consume and expect to spend. If you live in the euro area, then obviously most of your savings will likely be denominated in euros. If you live outside the eurozone, it can still be reasonable to add some Euros to your savings structure to protect your consumption, which can be pegged to the Euro. It may also be advisable to build a portfolio of deposits from a basket of currencies. Such a portfolio may include deposits in other currencies, such as dollars and pounds. This will help you to diversify and hedge against rising prices of imported products, as well as get a more attractive rate (rates in dollars are now higher than in euros) and possibly exploit the changes in exchange rates.

Interpret correctly the advertised interest rate.

Please note that income from deposits and savings accounts is taxed in some countries. The nominal interest rate is the pre-tax rate. Information about the tax regime is provided indicatively. Clarify your tax status and the ability to reduce tax.

Explore the possibility to open an account online.

The European Union includes 27 countries. Conditions for deposits in all of them are very different. The ability to open an account and deposit online will allow you to significantly expand your choice and find a bank with the best interest rate. Pay attention to the note about opening an account online on our website.

Get to know the suitable Deposit guarantee scheme (DGS).

All EU countries have fairly similar deposit guarantee schemes. The maximum amount of compensation, per depositor, per credit institution, is €100.000, including accrued interest. Amounts above €100.000 will not be insured. For countries outside the Eurozone, the maximum amount of compensation is fixed and repayments are made in local currency. It’s recommended that you allocate your funds to different banks if you are unsure of the credit quality of a particular bank. If you open a deposit in a local branch of a foreign bank, your funds will be insured by the scheme of the bank’s country of incorporation.

The DGSs cover fixed-term deposits, savings deposits, and sight/demand accounts.

The law requires banks to label deposits included in the scheme. Look for this information on the websites of banks.

When investing in structured products and investment deposits, your funds may not be fully or partially insured by the deposit guarantee scheme. Check with the bank.

Please note that subordinated deposits are not covered by deposit guarantee schemes.

Read more about deposit guarantee schemes here.