Meeting Belgium’s Savings and Inflation Challenges Head-On

Belgium’s Low Bank Deposit Rates - A Persistent Issue

Belgium's bank deposit rates continue to lag behind other eurozone countries. In fact, a study by the IESEG School of Management found that the average rate paid by banks on savings deposits in Belgium was just 0.96% in June 2024. This starkly contrasts with Luxembourg’s 3.44% and France’s 2.55%.

In his report, Eric Dor, the Director of Economic Studies at IESEG, was keen to emphasize the disparity in interest rates for Belgian savers, who earn significantly less on their deposits compared to many of their European counterparts.

Belgium’s High Inflation Rates - Compounding Economic Woes

Compounding the situation further, September 2024 saw Belgium once again crowned the "inflation champion" of the eurozone, with an inflation rate of 4.5%. This is substantially higher than neighboring countries like Luxembourg (0.8%), France (1.5%), Germany (1.8%), and the Netherlands (3.3%). Higher inflation translates into increased prices for essentials such as food, energy and travel; diminishing the purchasing power of Belgian consumers.

Alternative Investment Options

While fixed deposits remain a common strategy to earn interest and offset inflation, other viable options exist, such as "Money Market Funds".

What Are Money Market Funds?

Money market funds invest in highly liquid, short-term instruments like cash, cash equivalent securities and high-credit-rating debt-based securities, such as government bonds. These funds are daily liquid, meaning your capital isn’t locked away for extended periods. Additionally, their high level of diversification spreads investment risk across various holdings and maturities, offering more flexibility compared to term deposits.

Money market funds have seen a resurgence in attractiveness since the ECB raised interest rates in July 2022. Even with potential future cuts, these funds can still provide viable returns, aligning more closely with Central Bank deposit rates.

Speak to Monnet Capital

Given the current economic climate in Belgium, where bank deposit rates are low and inflation is high, exploring alternatives like Money Market Funds, with their higher liquidity and alignment with Central Bank rates, can help preserve and grow hard-earned capital. In fact, they are a compelling option.

If you want to learn more about Money Market Funds as an alternative to traditional bank deposits, Monnet Capital is here to offer insights and guidance. With over 35 years of experience, we aim to provide clear, unbiased advice in all areas of Corporate, Family, Ethical and Wealth Management.

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