Saving and investing - compare products

It pays to compare products before you decide how best to save or invest your hard-earned cash. 

Compare savings and deposit accounts

With most savings and deposit products, there is little risk to your money. There is a government guarantee for certain providers which will protect your money up to certain limits and timelines. It is easy to compare returns by using the compound annual rate (CAR) or annual equivalent rate (AER). The greater the AER or CAR, the more interest you will earn. But make sure you compare like with like, using AER or CAR. Often, online and telephone-based accounts pay higher interest.

When picking a savings product, you should ask:

• What is the interest rate? Look at the CAR (compound annual rate) or AER (annual equivalent rate) to compare rates in different accounts. Is there a minimum deposit required to qualify for that rate?
• Does the account pay an interest rate ahead of the inflation rate or is there an inflation risk to your capital?
• Is there a minimum lodgment or withdrawal for regular savings?
• Is the interest rate fixed or variable? If the rate is variable, does the account guarantee to meet a certain rate, such as the ECB rate?
• Is the deposit for a fixed period? If not, what notice do I need to give to withdraw money?
• With a fixed-term deposit what penalties do I have to pay if I want to withdraw my savings early?
• What savings in interest could I make if I pay a lump sum off my loan or credit card instead?

Comparing investments

When you compare investment products, you should consider two key factors:

• Risks involved - most investments do not give you a capital guarantee. How much of your original capital could be at risk? Is there a risk of poor returns? Is there inflation risk?
• The likely return - risk and return go hand in hand, so as a general rule the lower the risk the lower the rate of return you should expect. With longer-term and higher-risk products, you can expect higher potential returns, but these are not guaranteed and you could lose some or all of your money. You need to consider carefully the effect of this on your financial situation.

When comparing investments, you should also look at:

• the minimum investment amount - can you top up your investment without having to take out a new product and pay full charges again?
• the minimum recommended investment term for your money
• access to your money - are there penalties if you withdraw your cash early?
• what fees and charges apply, as these reduce the value of your investment.

You can get information about investment products directly from many banks, life assurance companies and investment firms. Financial advisors, including brokers and tied agents, also advise on and sell these products on behalf of the main providers.

Consider getting professional financial advice as these products are more complicated than savings and deposit accounts. Make sure any advisor you use is authorised to give investment advice and get the most from any financial advice you take by asking the right questions.

When choosing an investment product, you should ask:

• What balance of risk and return are you looking for? The higher the risk, the higher the potential returns should be.
• What is the minimum recommended term of the investment? If it's a long-term investment, can I afford to tie up my money for that long?
• Will you have to pay additional charges if you withdraw your money early?
• What are the charges? How much would your investment have to grow each year to cover charges?
• How much of your original investment is secure, if any? If the product includes guarantees, what exactly do they cover and what conditions are attached?
• How much tax will you have to pay on your return?
• Could you get a more attractive and definite return elsewhere for the same lump sum and term?
• What happens to your investment if you die?
• How can you find out how your investment is performing?

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