- Savings bonds . Savings bonds (usually available to private individuals only) are a simple way to lend money to a state. Several European treasuries sell them directly through their own website, from as little as EUR 50 and for terms from one to ten years, and the rate is often meaningfully higher than a bank deposit. An additional benefit - there is no personal income tax to be paid on the interest income, the purchase is commission-free, and you do not even need a securities account. By the way, it is possible to withdraw money from savings bonds faster, but then you will lose all interest calculated on them.
- Deposit in another bank . If your bank offers a low deposit rate, you can see what other banks pay, at home and elsewhere in Europe. In all countries of the European Union, deposit guarantees apply to investments up to EUR 100,000 in each bank. Accordingly, if the bank cannot repay the deposit, the state will. Deposit rates can differ significantly between banks, but due to the state guarantee - the risk of all deposits is basically equal. For example, Bigbank offers a 12-month time deposit with a return of 2.5%, while Swedbanka - 0.7%. Rates vary widely between countries, so a bank in another member state may well pay more than your own. Comparison sites collect local offers, and the deposit platform Raisin is widely used across Europe. It should be noted that nowadays opening an account in another bank is not an easy task and it may not pay off in the case of a relatively small amount of investment.
- German or other short-term bonds. An alternative to savings bonds is to buy government bonds. One-year German government bonds, which could be the safest investment in the euro currency, are currently yielding 2.6%. But buying bonds is not so easy. The Baltic states' own bonds, for instance, are easy to buy through the larger banks' internet banking. For a term under a year such bonds have offered 1.5-2% including bank commissions, with a minimum purchase of EUR 1,000: not as good as savings bonds, but better than a deposit at the same bank.
Bonds can also be bought more advantageously through the NASDAQ Baltic stock exchange, but then you also have to recalculate brokerage commissions, which would pay off only with a larger investment. Also, unfortunately, the bonds of the Baltic countries have low liquidity - accordingly, they have few regular buyers and sellers, as a result of which trading with them is unpredictable.
Bonds issued by the German government are more attractive because their liquidity in the stock exchange is much higher. Accordingly, this means that they can be bought and sold more easily. The yield of German short-term bonds is in the range of 2.5-2.8% interest, from which the broker's costs for the transaction must be deducted (approximately 0.3% of the purchase amount). Buying such bonds from Baltic banks can be a relatively complicated process that involves calling brokers. Therefore, I assume that the more personal the bank's service (such as Signet Bank), the easier it is to complete such a transaction. On the other hand, for example, Interactive Brokers offers the purchase of German government bonds through its platform on the Internet.
When buying national bonds, one should be well versed in yield calculations and, in general, such an exercise should only be done by an experienced investor. Bonds can also be sold at any time if the money is needed sooner. But if the market interest rates have changed or there are not many other buyers in the market (there is low liquidity of the securities), small losses can also occur. A securities account is required and additional account servicing expenses (for example, securities holding fees) must also be calculated.
- Bond Index Fund. Just as it is recommended to buy not individual stocks, but stock index funds (ETFs), so it is with bonds. A bond index fund provides diversification as well as very good liquidity - you can sell your investment at any time of the working day. For example, the iShares € Floating Rate Bond fund invests in low-risk short-term euro-denominated bonds and their average return is around 3% per year. The fund trades on both the London (EFRN.L) and Berne (EFRN.BN) stock exchanges. An alternative fund is iShares Ultrashort Bond (IS3M.DE or ERNE.AS), which also buys short-term European corporate bonds, or iShares Government Germany 0-1yr (EXVM), which buys short-term German government bonds.
It should be taken into account that the return of these funds is not fixed and may change according to the market situation. A securities account is required for the purchase and it can be opened either with a local bank broker or with an international one such as Interactive Brokers or Saxo Bank. Broker commissions must be paid for buying, selling and holding the fund, according to their price list. Buying ETF funds will be significantly cheaper than, for example, buying government bonds.
- Money in the account. There are some banks, payment institutions and brokers that pay for the money in the account. This fee is usually not high, but still better than nothing. For example, Wise, a payment institution created by Estonian entrepreneurs, but now based in Belgium and England, currently offers 0.69% (after income tax) for a balance in EUR currency. You don't have to do anything, you don't have to pay commissions or anything else - the interest will be credited to your account every month. In addition, money will be immediately available whenever you need it. Brokers Lightyear (1.75% for deposits in EUR), Saxo Bank and Interactive Brokers have a similar program.
In general, it can be concluded that there are alternatives for safe short-term investments and they should be used so that the deposit money does not unnecessarily feed the profits of Scandinavian banks.