Looking for the best savings account in Belgium? You're not alone. We've been there too, scouring the internet for hours, comparing rates and terms. It's a tedious process, isn't it?
But here's the thing: the highest interest rate doesn't always mean the best savings account. There's more to consider, from deposit limits to bank stability.
That's why we've done the hard work for you. We've compared all the savings accounts in Belgium, considering not just interest rates, but also convenience, safety, and hidden catches. Let's dive in and find the perfect savings account for you.
The best savings accounts in Belgium
👍 Savings accounts with the best interest rate
The Tempo Sparen account by ING yields a 3.00% interest rate, which is currently the highest in Belgium. However, it has a maximum monthly deposit of €500.
The Vision Plus account by Santander has a 2.45% interest rate, and has no limits on your deposits.
👎 Savings accounts with the worst interest rate
There are wide differences in interest rates. The savings accounts by KBC, Nagelmackers and Europabank have an interest rate below 1%. This is well below inflation, meaning you effectively lose savings by keeping your money on such an account. The worse savings account is by Europabank, with a meager 0.40% interest rate. If your savings are with them, it might be worth shopping around!
Best savings account for your emergency fund
Before you invest your savings, it makes sense to set up an emergency fund. Its purpose is to provide a safety net in case of unexpected events: you lose your job, your car breaks down and needs a costly repair, there’s a leak in your house and the plumbing needs an overhaul, etc…
The emergency fund should be about 3 to 6 months of your monthly expenses. This makes MeDirect's Essential savings account an interesting account for your emergency fund. It offers a 2.50% interest rate, including a very high 2% base rate. Deposits are limited to €25,000, but depending on your expenses, there's a good chance that's enough to cover your emergency fund.
How do I choose a savings account?
Consider the following criteria when choosing a savings account:
- Interest rate: Choose an account with good interest rates to grow your money faster. You want to maximise the return on your savings.
- Fees: Some savings accounts charge an annual fee, whereas others are free.
- Convenience: Check if the account has limits that don't match your savings rate. For example, is there a maximum balance on the account? Or is there a maximum amount you can deposit each month? Also, can you create an account online, or must you go in person to a branch?
- Taxation: All savings accounts in the comparison are regulated. This means you are exempt from the first €1,020 in withholding tax on your interest gains.
- Safety: Check the bank's credit rating. Also, ensure it is in a country with a strong deposit guarantee. Keeping your money secure in a trusted bank is the best way to ensure you are protecting your savings.
Why should I open a savings account (and why shouldn't I)?
A great place for an emergency fund
A savings account is a great place to put money that you need to access at any time. If you deposit €1,000 today, it should be safe tomorrow, next week, and next year (unless the bank fails). Even a little more, because of the interest.
That's why a savings account is the best place for your emergency fund. It's a safety net for unexpected events, like losing your job, a costly car repair, or a plumbing leak. Without an emergency fund, you may have to take out a high-interest loan. And avoiding debt is the first rule of responsible financial planning.
You're unlikely to meet your financial goals with a savings account
Yet, a savings account is a poor place to save for the long term. The reason is the low interest rate paid out by banks. In fact, due to inflation, you may have "lost" savings this past decade. Keeping money in a savings account hurt you, as interest rates were lower than inflation. A €10,000 savings account in 2006 would be worth about €7,500 today, after inflation.
A savings account won't help much with your long-term goals. In contrast, an ETF like IWDA earned a 10.2% average annual return since 1979. This beat inflation by a wide margin. By investing your savings in the financial markets, you earn a dividend on the growth of the world economy. And ETFs are the most sensible way to invest, thanks to their diversification. We think that ETF investing is the best way for most young people to grow their wealth over the long term.
The illustration below shows the difference between a savings account and investing. A savings account provides a predictable and stable return. But you don't earn much of a return. Investing is more of a rollercoaster because the financial markets go up and down over time. But over the long term, you can be almost certain that you will earn a higher return. After all, investing in ETFs means you invest in the world economy. And the world economy has experienced enormous growth over the century.
How a savings account works
How the interest rate works
What is the fidelity premium?
The interest rate on a savings account consists of the basic rate and a fidelity premium. The bank always pays out the basic rate. But there are constraints to earning the loyalty premium:
- You only get the fidelity premium for money that stays in your account for 12 months.
- When you make a deposit, the premium rate remains fixed for 12 months. The bank cannot change it during this time.
Deposit funds into your savings account frequently, withdrawing occasionally as needed. For example:
- You put €1,000 into your account on February 1, 2024.
- You add another €500 on June 5, 2024.
- You add €600 on September 27, 2024.
The fidelity premium for:
- The €1,000 will be ready on February 1, 2025.
- The €500 will be ready on June 5, 2025.
- The €600 will be ready on September 27, 2025.
When do I get my interest?
The banks pays out the basic interest once a year on January 1st. The fidelity premium is paid four times a year, on the first day of the quarter after it is earned. So, the fidelity premium is paid on January 1st, April 1st, July 1st, and October 1st.
To make it concrete:
- You put €1,000 into your savings account on May 1, 2024. The basic interest rate is 0.5% per year.
- On January 1, 2025, you get interest for the period from May 1 to December 31. This is for 8 months, which is 2/3 of a year. So, you get 2/3 of 0.5%, which is €3.33. You don’t get a fidelity premium because the €1,000 has been in your account for only 8 months.
- You leave this money in your account until May 1, 2025, making it 12 months in total (from May 1, 2023, to May 1, 2024).
You are now eligible for the fidelity premium. If the fidelity premium rate is 0.5%, you earn €5 on May 1, 2025. The bank will add this €5 to your account on the first day of the next quarter, which is July 1, 2025.
Why is the ECB rate different from what my bank offers?
The European Central Bank (ECB) sets key interest rates that influence the cost of borrowing and the return on savings in the euro area. But, the interest rates offered by your bank may differ from the ECB rates because it has operational costs, and it also aims to make a profit.
How the taxes work
How is my savings account taxed?
In 2024, you won't pay taxes on interest from regulated savings accounts up to €1,020 per person per year. For married couples or legal partners with a joint account, the tax-free amount is €2,040 per year. If your interest goes over this limit, the bank will take a 15% tax on the rest.
Banks look at each savings account separately. If your total interest from all accounts exceeds the tax-free limit, you must report it on your tax declaration yourself.
If you save through an unregulated account, you must pay a 30% tax on all your interest gains. There is no tax exemption. For instance, this is the case for the savings product offered by Trade Republic.
What's the difference between a regulated and a non-regulated savings account?
A regulated savings account offers a base rate and a fidelity premium rate. The premium is for money that stays in the account for over a year. A savings account without a fidelity premium is a non-regulated savings account. The tax authorities impose a 30% withholding tax on its proceeds starting from the first euro.
Safety of a savings account
How safe is my money in a savings account?
When you place your money in a savings account, you entrust it to the bank. But the money doesn't stay there. The bank spends most of your savings almost immediately. For instance, it loans it to a couple buying their first home or to a company that needs capital to grow. The bank can also choose to invest your money.
Of your savings, the bank keeps only a little behind. After all, you expect that if you go to the ATM today and withdraw €100, the bank will be able to give you your full €100. The bank must create the illusion that it has all your savings. It hasn't, as it loaned most of them.
The system works as long as everyone keeps believing in this illusion. But it's a very unstable equilibrium. The system breaks as soon as people stop believing in it. Then they will all rush to get their money out, but the bank will not have all the money. In a bank run, a few savers will get their pennies back. But most will lose everything unless the government steps in to compensate them. Such scenarios play out regularly. For example, in 2023, the US Silicon Valley Bank went bankrupt in under 72 hours.
Another example is that during the 2008 financial crisis, Iceland's Kaupthing Bank collapsed. Belgian savers with money in that bank had to wait months for a bailout. The French, Luxembourg, and Belgian governments had to agree first. The bank had "invested" their savings in junk US real estate loans that later turned out to be worthless.
In contrast, customers with investment funds at the Icelandic bank saw their capital in a Crelan account two weeks later. After all, Kaupthing had entrusted their investments to a depository institution. In other words, the bank failed but did not touch the customers' investments. In that respect, investing is safer than leaving money in a savings account.
What about the €100,000 deposit guarantee?
The €100,000 deposit guarantee holds for the money that you hold in a savings account at a bank. As mentioned, your savings account balance appears on the bank's balance sheet. This means that when the bank goes down, so does your money. This is one of the main reasons for the deposit guarantee: to protect Europeans when their bank fails. The 2008 crisis highlighted the guarantee's vital role. But the scheme's success depends on the bank's country's stability. For instance, there may not be enough money in a country's pot to cover everyone's bank deposits if a bank were to fail.
What's the credit rating of a bank?
Credit rating agencies, like S&P, Moody's, and Fitch, check banks' finances. They give high ratings to banks that are in good financial shape. A bank with shaky finances gets a poor credit rating. Banks with a lower rating are more likely to default. If they do, you will lose your savings beyond the €100,000 deposit guarantee.
How to switch banks
There's a free bank switching service that takes care of switching banks for you. With the service, your new bank will ensure that your current account at your previous bank is closed. After settlement of final charges and income, the balance will be transferred to your new bank. The payment cards that were linked to the old current account are cancelled in the process. The new bank also takes over all your standing orders.
Conclusion
With numerous savings accounts to explore, choosing one that fits your needs is crucial. The Tempo Sparen account from ING stands out for its high-interest rate if you don't mind the deposit limit, while Santander's Vision Plus offers flexibility without sacrificing returns.
However, if your aim is long-term financial growth, savings accounts might fall short. Inflation can erode your savings over time. By complementing your emergency fund with passive investing in ETFs, you can potentially earn a higher return.
Curious about how to get started with investing? Curvo makes it straightforward and accessible, removing the complexities traditionally involved in ETF investing.