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Petr Kozelský

31.10.22

How to Safely Grow Your Free Funds Today

Every era has its pros and cons. The current period is unique: on one hand, we face high inflation that reduces the value of our savings, but on the other hand, it presents interesting opportunities.

What’s It About?

The key interest rate set by the central bank is currently 7% p.a. Such a high rate was last seen in the Czech Republic in 1999. It is important to acknowledge that the era of extremely cheap money is over. While this may be disappointing news for borrowers, it is good news for savers—people who have free funds and want to safely grow them. For them, after a long time, an interesting period has arrived.

The Essential Base

I consider a savings account the foundation of every properly structured portfolio. It serves as an emergency reserve, which you can immediately use to cover unexpected expenses. Practically every bank today offers a savings account that reflects the central bank’s key interest rate. Currently, the highest interest on a savings account in banks ranges from 6.01% p.a. to 3.00% p.a. (October 2022).

Your funds are, of course, legally insured against bank insolvency up to €4,000 (equivalent of 100,000 Kč) and are automatically subject to withholding tax.

Choose Carefully

When selecting the right savings account, pay attention to the terms and conditions of each bank, including:

  • Tiered interest rates – different rates for different amounts.

  • Active account usage – some banks require regular transactions.

  • Time-limited offers – special rates for new clients or limited periods.
    All conditions should be checked and adapted to your individual needs.

What If I Want More?

If the interest rate on a savings account is not enough and you would like to grow your money further, there are interesting alternatives today:

  • Deposits at a bank placed directly with the CNB

    • Yields up to 6.25% p.a.

    • Legally insured under the deposit insurance fund

    • Interest is not automatically taxed, so the obligation is yours

  • Investment companies that safely deposit funds at the CNB

    • Yields up to 6.5% p.a.

    • Funds are usually available within approximately 14 days

For all these options, it is important to know that once interest rates fall, this change is reflected almost immediately in your returns. Therefore, these alternatives should be considered short-term solutions, taking advantage of the current exceptional situation.

Summary

  • A savings account is a basic and safe option.

  • For higher returns, deposits with banks or investment companies can be used, but always with awareness of short-term interest rate fluctuations.

  • A financial advisor can be an invaluable guide—the financial world can be a jungle, and having someone who knows it well is highly beneficial.

I would be happy to guide you!

Note: CZK amounts have been converted to Euro using a fixed rate of 25 Kč = 1 €.