IROVERS.jpgALIBABA.jpgmagna carta.jpgW300-x-H250-KUNINI-BANNER-e.gif300x250 flyboard.jpgIROVERS.jpg300x250 ECO LED.jpg300x250 SPS CAR HIRE.jpgST-ANDREWS.jpg

EXPAT FINANCE

Are banks a safe place to deposit money?

One of the things that we are often told by people is that they prefer to deposit money in a bank because even though the interest rates are low they feel their money is a lot safer.

However, let us examine the facts. Any guarantees to the security of your money is only as good as the legislation behind it. In an EU bank a person is only guaranteed up to 100,000 Euros. In the UK it is £85,000. In the worst case scenario any monies deposited and invested above that would be completely lost. Therefore if you had 250,000 Euros in an EU bank and things went wrong you would lose 150,000 euros – Fact.

Now I hear you say that banks are safe and reputable institutions. Again let us look at facts. After the banking crash of only 10 years ago over 70 banks went out of business. Although some were bailed out by governments, others were allowed to fail and in some cases investors lost their entire life savings. The idea that all bankers are responsible people looking after your best interests and your money is another myth. We have all seen how many were caught playing virtual roulette with their customers money - potentially with your money ! All this to generate huge profits for themselves whilst at the same time giving you a pittance in return.

If we go back again to the bank crash of 10 years ago and look at an example of where it all went wrong we can see that banks were lending huge amounts of money in what is known as the Subprime market. The banks were lending up to 130% of the value on a property to people who could not prove what their earnings were. These people in some cases, might even have been unemployed but all they had to do was sign a piece of paper saying they were working, earning X amount of money and could afford the repayments. Of course this caused a housing bubble and because of a surge in demand the prices escalated. Before too long people started defaulting on payments which caused property prices to crash and the banks could not recover their loans.

Ask yourself a question. Would you lend 130% of the value of something to someone you had never met before who said they could afford the repayments without undertaking basic checks? No, of course you wouldn’t. However that was what the banks were doing with your money. In other words they were being highly irresponsible with your hard earned cash.

Of course banks have a role to play in today’s world. People need somewhere to have their salary or pension paid in which they can access any time of the day or night. Standing orders and debits are easily arranged. Payments can be paid over the telephone, the internet or simply with a plastic card. They are very good at that type of thing. However for saving and investing I would recommend that you think long and hard as to whether they are the best option. The returns are poor and your money is nowhere as near as safe as you think. On top of that you are only offered the products that makes them the most money. They are not independent. They do not search the whole market for what is the best option for you.

We are able to give totally independent advice on a range of savings and investments. If you have any questions, would like a financial review or want recommendations of what and where to invest your money we can be contacted at:

admin@expatfinance.org

or phone 08 7831 7834