Solutions to save easily in Switzerland

Hi All,

Today’s savings accounts don’t pay anything and don’t even cover inflation, so you lose money if you put money in a savings account at the bank.

What is the closest and simplest solution that can cover inflation? (for Swiss people)

Thank you for your feedback

If you don’t want to invest, you can either open a compte épargne jeunesse at Caisse d’épargne d’Aubonne with 1.25% interest if you are younger than 30, or 0.25%/0.5% if you are older than that. Or you can open a Compte d’épargne bonus at WIR bank. Rate is 0.1% but it goes to 0.3% if you bring at least 5000k on each beggining of the year. You can even buy cashier bonds at Caisse d’épargne d’Aubonne : 1% for 5 or 6 years or 1.25% for 7 or 8 years. Coop Caisse de dépot/Depositenkasse gives you 0.2% but it is not a bank so the money must legally stay 6 month with them before you can withraw.

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What are you saving for ? How much ? For how long ? What flexibility for withrawal do you need ? Do you need a proper e-banking associated with it so you can get the money easily ?

Hi,

Thanks for your answer :slight_smile:

In order to have more than 1% profitability, today you only have to invest in the stock market, on Degiro for example?

It’s to invest for 20 years, after 20 years I should be able to withdraw the money “easily”.

Let me explain, my brother and I are going to inherit the family apartment via “USUFRUIT”, we would like to “build” a savings fund, the day the apartment will be ours and cover the costs of the beginning.

Thanks

How much does it matter whether you have less money than you put initially?

Hi SoCh,

Curiosity had me subscribe. I’m not sure I really understand your situation.

  1. Are you inheriting the apartment now while your parents keep the “usufruit”?

  2. Are you inheriting the “usufruit” while your parents remain the owners of the apartment?

  3. Is the 20 years term a sure thing (i.e.: will you inherit the apartment in 20 years or is it dependent upon other factors (your parents living there for longer or shorter than that, for example)?

If you and your brother are now the owners of the apartment and there is a mortgage on it, a possibility is to put the money into paying the principal on the mortgage. This should beat inflation (which is really low in Switzerland nowadays).

If you’re not yet the owner of the apartment but there is a mortgage on it that won’t be completely paid off in 20 years, an option is to save the money in a 3A account, either through a bank, if you are very risk averse, or through VIAC if you want to try your hand at some stocks/bonds. The tax advantages should also beat inflation and, provided you’re going to use that apartment as your primary house, you should be able to use the money in your 3A for that (complexities may arise if you own another house and/or you have already used your 3A/2nd pillar for one, I’d advise speaking with a specialist in welfare about it. Don’t buy any of the insurances (s)he might try to sell you, though).

If you need to save more money than what you can claim as a 3A contribution, you can ask your pension fund if there’s a lack of contributions in your 2nd pillar that you could fill while benefiting from the tax advantages. It would be locked for 3 years and could not be used for many things but should be available to pay off a mortgage provided it is on your primary house and the law doesn’t change until then (it very well might).

Stocks are an option for a 20 years investing time horizon but there is a risk involved and it’s important that you are familiar with it and willing to take it. I’d talk about it thoroughly with your brother before diving in.

Edit: Or will you need the money in 20 years not to pay off the potential mortgage but to settle the sharing of the estate with your brother (i.e. : you want to keep the apartment and will have to pay half of its value to your brother)?

Hello,

@ nabalzbhf: I don’t want to lose money.

@ Wolverine:

The parents are the owners until the end of their lives, after that we automatically become the owners.

My brother and I already own a house and I own an apartment, As a result, we already have indirect depreciation via a 3A, to pay off the mortgage.

Originally, it was an idea between my brother and me, to put some money aside in order to pay some expenses and/or if we need to do some renovations/repairs at the time we are going to get the apprenticeship back.

But I’m just wondering if this is a good idea, because we’re going to lose on inflation…

Ok so if saving is not a good solution and if 3A is not possible because we already have one, what are the solutions? Not much choice but to invest.

Thank you for your advice, it’s rewarding

Then you don’t have much choice, cash/savings account (risk free bonds have negative yields).

Saving is always an option. The CPI (Consumer Price Index, which is used to reflect inflation) for 2019 in Switzerland is 0.4%. Saving with a “Bonussparkonto” at bank WIR can yield up to 0.7% (provided you save more than 5,000.- a year and buy 25 shares of the bank (roughly 10,000.- with roughly 2.5% dividends).

Then you have term deposits, which I wouldn’t advise since the rates are very low. My Raiffeisen offers 0.4% for a 10 years term, for example.

For a time horizon longer than 10 years and assets meant to grow over a year of expenses (rough personal estimate), I’d still consider investing part of it (say 10% if you’re very conservative) in a fund of your choice (one single fund or robo-adivisory counsels, to keep it simple). People here will probably advise Degiro or IB, I’m using Vaud Kantonalbank’s TradeDirect because I’m investing in individual swiss stocks and want to be able to use the voting part of my shares and don’t mind paying extra fees for that (Swissquote would offer that too, I’ll have to investigate that option).

If you don’t want to risk loosing money and are willing to put in more than 5,000.- a year, the WIR Bonussparkonto is the best option in my opinion. The “buying shares” part is optional and carries a risk of going to zero but I don’t see it as very significant so I’d personally put 10,000.- in it to chase the better yields. Of course, your mileage may vary and if 10,000.- would be a significant part of your savings and you don’t want to risk them at all, you can skip it and settle for a 0.3% total yield (it was at 0.6% a few months ago so it might raise again if the situation regarding yields gets better).

Edit: if you have a mortgage, another option would be to pay it off, then dip in it again (or get a new one) when you need the money for your parents’ appartment. Paying off debt is a way of getting fixed interest on your money (by canceling negative interest) and as long as the collateral is still there and you still have a salary (assuming you do), increasing the mortgage (or getting a new one if you have written it off entirely) will still be an option to get liquidity when the need arises (that’s how my parents (and most other people of their generation where I live) have done it: live off your salary, buy a house, pay off the mortgage as a way to use your potential extra cash, live off AHV+2nd pillar in retirement).

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Thank you so much for taking the time to answer :smiley:

In the end, after discussion, we’re not going to do a savings account.

I’ll keep my “security cushion” in my current savings account.and I’m gonna invest in Degiro

Thanks

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Glad you’ve found what works for you. Enjoy the journey! :slight_smile:

Thanks, I’ll bite, mainly because I’m searching for the mental stimulation to come up with better understanding and actionable decisions.

Context:
Most of the financial advice/studies we can find online come from the U.S. Switzerland isn’t the U.S. We have low inflation and high regulations that, to me, seem to make the financial climate way less predatory (people, in Switzerland, are way more protected from themselves than in the U.S. which, incidentally, means we can take way less risk to pursue opportunities. When it comes to Switzerland, the safe way seems to be the only really rewarding one).

The questions:

  1. When I see the difference in yields between stocks and safe assets (savings accounts, bonds, …), I can’t help but feel that a disruptive actor should be able to offer better fixed rates than what we are currently seeing. Yet, they seem to be capped at 0.5% for the best deals. Why is that and where are the opportunities that I am missing?

I have some clues:

  • Negative interests make borrowing money from the SNB cheap. Banks don’t need my money, so they won’t offer me any yield for that.
  • Regulations make it mandatory for institutional investors to invest a good chunk of money in safe assets with low yields, making them less able to guarantee decent fixed yields.
  • There is a fee cartel that makes it not interesting for any of the qualified actors to offer better yields. Rules for qualification are strict so creative disruptors can’t really get into the market with new “banking” models.
  1. Same but regarding leverage: in Switzerland, regulations make it harder to get deeply in debt by traditional means since principal repayments are usually pretty high (killing any possibility to use conventional loans for investing purposes, other than life or business ventures). I can see two exceptions to that: mortgages (the first 67%) and margin loans (through a broker).
    Am I missing something (another option to borrow money without a big need for amortization - other than a family loan which I’m not willing to explore)?

Why do you think those should be different? How is the 0.5% compared to historical rate (inflation adjusted).

When people remember 2%, 4% etc. fixed income yield, they also tend to forget how much inflation there was.

The more I explore it, the more I think that they should not be different. Safe returns are priced at safe rates and lenders have no need to take on more risk for lower returns by lending you money when they could be doing what you would do with that money themselves. The exception is business funding, which at least some banks are fond of.

Basically, I’m mainly figuring out that there’s very little room for arbitraging in the loan/yield market while pondering on whether there’d be a way to come up with a solution allowing one to offer better yields (say 1-2%), mainly for philosophical reasons (I feel that some such solution should exist, could exist and am willing to explore how, given a long enough time horizon to gather the required funding and qualifications, I could make something like that happen).

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