Best option to save money for kids

net4hack

My self and my wife would like to have some regular amount saved for my 2 kids, like a particular amount going by direct debit to another account which we could use when they reach their college age. We would like to use the money in case of an emergency. Any suggestions?

king02

You should look into the childcare plus account with the post office when you can divert part or all of your monthly children's allowance into a feeder account for twelve months. After 12 months it is put into a relatively high interest dirt free account.

net4hack

Would I be able to do it for a couple of years? I would like pay a certain monthly amount till they reach 17 or 18.

king02

You can do it for as long as you want. The amount accumulated after 12 months is invested for 5 years. You can access it anytime but it affects the interest earned. When the 5 years are up you decide to re-invest in savings certs or bonds, again Dirt free. Once you are 5 years saving you have an amount maturing every year should you need it for any purpose. It is amazing how much can accumalate if you could manage without it.

mseconnolly

Hey, Ive often heard of people making an account in the bank, credit union, or post office (Pick the place with the highest interest rate!) and they put the money they get from "Child Benefit" into it as a means of saving for their child Just a suggestion

net4hack

I like the option suggested by mseconnolly. I prefer to save the child benefit each month. Could I do it automatically rather than going to the post office each month and do it.

Which is better - Childcare Plus or ChildCare Save Account - dont know what is DIRT!

http://www.anpost.ie/AnPost/MainContent/Personal+Customers/Wizards/Save+or+invest+money/

king02

You never have to go near the post office. Once it is set up it automatically goes into the feeder account each month. At the end of the 12 months you get a letter to let you know the amount being invested in the interest bearing account. Childcare plus is the best option. DIRT is Deposit Interest Retention Tax which takes about 30% of any interest earned. This is why these accounts are appealing because they are exempt from DIRT.

net4hack

Thanks guys...

mseconnolly

Hey, Im glad you liked my suggestion To tell the truth Im not really sure which a/c would be the best to open, so you'd be better off to ask in the post office whenever you are setting it up

DIRT is the abbreviation for Deposit Interest Retention Tax. Its only a tiny amount of tax that you pay on the interest you make on your savings so its not going to be very big. I think I pay something like 50c DIRT on my savings every year so I wouldnt be too worried about it

Another thing you could do is set up an account in the credit union where you lodge the money every week/month but only the children have the ability to take it out as they are the owners of the credit union book (But you keep the book!), so you can decide when they can take out the money (ie. College/ School Trips, whatever you choose).

I hope this helps

BazzaDP

mseconnolly wrote: »

DIRT is the abbreviation for Deposit Interest Retention Tax. Its only a tiny amount of tax that you pay on the interest you make on your savings so its not going to be very big. I think I pay something like 50c DIRT on my savings every year so I wouldnt be too worried about it

DIRT is 41% of any interest profit so it is something to worry about - especially for long term savings.

Savings should increase for two reasons: 1) because you continue to put money in and 2) because you earn interest on those savings. Both are important and the cumulative effect of 2) can be significant as the amount of savings grows over the years - but DIRT takes nearly half of that at the mo.

Let's say you put aside €1,000 and you get 1% interest. That means you should get €10 interest after a year. However after DIRT you'd only get €5.90.

So it won't cost you anything of what you put in (your €1000), but will take a big chunk out of the interest you should be making on that (your €10). This gets more significant as your savings grow.

Interest is there also to offset inflation - which basically is the reason things get more expensive every year. Without a decent interest rate (whether because the original rate is low or because DIRT effectively makes it low by taking nearly half of it), it's difficult to keep up with inflation and so effectively your savings get worth less and less as time goes on.

Mseconnolly, the reason it's only a small amount for you is that you're getting a very small interest rate. No where's paying great rates as interest rates are historically low at the moment, as a reaction to the economic times we're in but hopefully that will change in next few years. Then again maybe at that point the government will reduce the DIRT rate to a less silly level.

Anyway point is, savings accounts with no DIRT are definitely worth looking closer at, depending what interest rate is paid and what other restrictions they come with. However often they pay less interest anyway or are so restrictive that they aren't actually worth investing in. Which is a shame.

NIMAN

I might be interested in the Childcare Plus account too, but another question regarding it.

It says save for one year and leave for 5yrs.
Does this mean that at the start of Year2, if you want to continue saving for your kids, then you are really opening a 2nd account? And then in Year3 a 3rd account and so on?

Or do they add what is accumulated over each 12 months into the 5yr savings account?

Slightly confused.

okiss

I would not go for the Childcare plus account.
You are getting no interest on this money for the first 12 months that you save.
At the end of 12 months your lump sum is invested for 5 years currently dirt free at the aer rate of 1.24%.

You would be better off putting your children allowance into 5 and half year savings certs. They pay interest from the time you lodge into them. The rate is 1.24% aer. Keep any eye on the interest rate. If they higher the interest rate you can take the money out & reinvest in the next series of savings bonds.

I would also look at regular savings accounts where you put in €100 to €1000 per month. If you look up http://www.consumerhelp.ie and under regular savings put in how much you want to save each month you can find out how much interest you will earn on your money.
Just be aware that some of these accounts are over 12 or 15 months and some have a lower rate once x amount is saved in them.