In this article
- How much does a deposit account yield?
- How to use a deposit account?
- And you, do you still use it? How?
Until a couple of years ago – before rates dropped to today’s official rate of 0.05% – many invested in deposit accounts. Today, many have abandoned this investment tool, which according to them remains a good tool for investing liquidity.
How much does a deposit account yield?
The yield of a deposit account is today on average less than one percentage point.
If you want to earn more, however, you can use some stratagem and then bind your money for periods up to 24 months or open a new account and take advantage of the promotions linked to new openings.
For many, these yields are too low but to me, this statement does not seem justified, as the yield on deposit accounts must be considered in comparison with a BOT of the same duration/maturity that has a yield almost close to zero.
It is therefore right to compare the deposit account with instruments of equal duration and risk.
Compared to BOTs, the Deposit Accounts have higher yields and a risk profile that varies from bank to bank, but in any case, it can be considered guaranteed by the Interbank Deposit Protection insurance Fund
up to one hundred thousand euros.
How to use a deposit account?
The deposit account must be used to invest cash
Usually, in the face of low costs, it has few functionalities and cannot be used for many activities except those based on deposits, withdrawals to pre-established accounts, and binding of money.
In my opinion, its main function, given the limitations in the withdrawal, is, therefore, to act as a piggy bank
for our money that we will need either immediately or within 12/24 months.
Another possibility of use is that of setting up objective funds,
accounts in which to bring together savings destined for certain objectives, such as holidays, marriage, children’s school, et cetera.
This is why it is not advisable to invest a large part of your liquidity in this instrument unless you want to remain very liquid, waiting for better times in which yields increase and in the meantime, you still want to have a return.
In conclusion, I think that the Deposito Account is one of those instruments that still has its validity, especially if one does not make the mistake that it can guarantee high returns.
And you, do you still use it? How?