Personal savings are at record levels despite inflation hitting near 40-year highs, new figures have revealed.

Deposits grew by the largest amount in 15 months in October, increasing by €1.6bn over the month to a staggering €149bn.

Year on year, household deposits increased by over €8.1bn, or 5.8%, according to figures released by the Central Bank yesterday.

During periods of high inflation, people are more inclined to spend before prices rise, according to economic theory. However, one financial expert said people were saving because they have less opportunity to spend their wealth.

Personal finance expert Brendan Burgess, of Askaboutmoney.com, said: "The economy is booming, we are spending, but we can't spend all the money we're earning, so we're saving and the Government's handing it out here, there and everywhere. 'We buy a car today because we expect it to be €10,000 dearer next month' - that might be a theoretical position but I've never met anyone who does that. I've never come across it in practice."

In Association with

Most savings are held in current accounts as the low interest banks pay on deposits means there is little point locking cash away for long periods. Any interest earned is also subject to a DIRT tax of 33%. Overnight deposits, which include cash sitting in current accounts, "are the main driver of the annual increases in household deposits", the Central Bank said.

Its latest Money and Banking Statistics report said: "The percentage of deposits held in overnight accounts now stands at 94%, the highest proportion since the series began. A decade ago, this ratio stood at just 50%.

"The deposits have concentrated in overnight accounts in recent years, as low interest rates across all deposit categories reduced the incentives to invest in notice or fixed-term accounts."

Many people are saving as they are unsure about the economic outlook because of inflation and the war in Ukraine, according to John Lowe, known as the Money Doctor. The personal finance expert said: "People are still cagey about spending.

"We are in difficult times, the cost of living has gone through the roof, the energy crisis, war in Ukraine... We don't know really what's around the corner and I think the vast majority of people are saying: 'Let's take things a bit easy.'"

The Central Bank report revealed: "Household deposits now stand at €149bn, higher than at any previous time. Deposits from households increased by €1.6bn in October. In annual terms, net household deposits increased by over €8.1bn or 5.8%. This is a significant reduction from the peak growth of 13.8% recorded in February 2021 covering the period of the lockdowns."

At the same time, net lending to households was €19m in October, driven by growth in consumer lending.

"Net consumer lending increased by €106m in October. This contributed to an annual increase in consumer loans of €254m or 2.2%," the Central Bank said.