Saving doesn’t yield anything! What are the alternatives?

Saving is a relatively safe way of investing your money. In times of low savings interest rates, alternatives for saving must be sought. In 2007 and 2008 you could achieve returns of up to 5 percent by saving. Interest rates fell sharply again from 2009 to 2012. At the end of 2012, you had to settle for a maximum of 2 to 2.5 percent, while inflation was higher than the highest savings interest rate. With such low returns, you will therefore lose purchasing power by saving. There are alternative forms of investment, but a higher return also entails a higher risk.

Investing instead of saving

By investing you have a chance of a higher return, but the returns can also be negative. Investing is a very broad description of different ways of investing money. You can invest in a risk-averse manner, for example in bonds, or you can consciously seek out risks, for example investing in shares or raw materials. You can purchase shares directly, but you can also opt for investment funds. The level of return when investing partly depends on a bit of luck.

Choose to save in deposits

Instead of a regular savings account without deposit and withdrawal restrictions, you can also opt for a deposit. You make agreements with the bank about the amount of the interest payment and about the length of time you will have to leave your money on the deposit. The advantage of this form of savings is that it yields a higher savings interest rate and that you will no longer be bothered by further interest rate drops. The disadvantage of this form of savings is that you cannot benefit from interest rate increases and you cannot access your money during the period that the money is tied up in the deposit.

Invest money in the house

Another way to invest money is to pay off the mortgage on the house. By repaying you reduce the tax benefit, but also the monthly costs. It is not wise to make additional repayments in all cases. Redemption may have additional tax consequences. Additional repayments on the interest-only mortgage only mean that you can deduct less mortgage interest from your income each year. You cannot later withdraw an amount that you have invested in your own home from the house. You should only invest money that you no longer need in the short term in the house.

Investing in a second home

In times when house prices rose sharply every year, it could be worthwhile to buy a second home as an investment. House prices have started to fall since 2008, but in the preceding years prices have risen sharply. In certain years, house prices have risen by more than ten percent per year. A lucrative trade was to buy a house with overdue maintenance and renovate it with a small investment. After the house was renovated, the house could be sold again for a considerable profit. Returns were made because the house had become more marketable and because of rising house prices.

Investing in gold

In 2008, stock prices fell sharply. Due to economic uncertainties, investors lost confidence in the stock market. Gold was seen as a good alternative. Due to the increasing popularity of gold, the value of gold has increased explosively. By getting in now, you may still benefit from a further rise in the gold price, but the risks are high. The gold price cannot continue to rise indefinitely. There will be a turnaround in the long term, as we have also seen with house prices.