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Investing to fund childrens education in 10yrs

  • 08-03-2019 1:59pm
    #1
    Registered Users Posts: 12 CarChange


    Hi all,
    €25k in savings.
    Would like advice on how best to invest it so that it is available in 10yrs to fund college education for kids?

    Obviously would like decent return for fairly low risk.

    What would you do?
    Thanks.


Comments

  • Closed Accounts Posts: 11,812 ✭✭✭✭ evolving_doors


    10 year An Post National Solidarity Bond
    • 16% Tax Free over 10 years (AER 1.50%)
    • Minimum investment is €50
    • Maximum individual investment is €120,000 (or €240,000 from 2 or €360,000 from 3 joint applicants)
    • You can access your money at any time by giving 7 days notice
    • There are no fees, charges or sales commissions

    Given that there's no DIRT I would think that's as low risk for high return as you can get compared to any bank....



    If you are living in Dublin you could move jobs/family to a cheaper county and rent out your old house whilst re-diverting the intended saving to pay off the mortgage early and then let the kids use it for college rent free in ten years time!!


  • Registered Users Posts: 306 ✭✭ chancer007


    Hi.

    I was in KBC this morning.
    Was thinking of saving €200/month for children college fund
    over 10 years,works out between
    €26,240 - €28,377 on low risk
    anyone go with them? any better alternatives?

    Thanks


  • Closed Accounts Posts: 11,812 ✭✭✭✭ evolving_doors


    chancer007 wrote: »
    Hi.

    I was in KBC this morning.
    Was thinking of saving €200/month for children college fund
    over 10 years,works out between
    €26,240 - €28,377 on low risk
    anyone go with them? any better alternatives?

    Thanks

    Dunno why you wouldn't go with An Post!

    Zero risk /zero dirt on interest with garunteed 16% total return. That would put you at the top side of the KBC bracket at €27840.

    KBC could easily put the money you give them into the An Post account and still make a profit off you. I'm open to Correction on the maths above.


  • Registered Users Posts: 1,490 ✭✭✭ thomasm


    You are not even likely to beat inflation with An Post so your funds will in effect lose value.


  • Registered Users Posts: 7,599 ✭✭✭ SureYWouldntYa


    thomasm wrote: »
    You are not even likely to beat inflation with An Post so your funds will in effect lose value.

    And they’ll lose more value sitting in a deposit account or low interest savings account

    Risk vs reward, if you want to be guaranteed your money at the end then low returns will have to be accepted


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  • Closed Accounts Posts: 11,812 ✭✭✭✭ evolving_doors


    thomasm wrote: »
    You are not even likely to beat inflation with An Post so your funds will in effect lose value.

    Relative to KBC it's a better return balanced with zero risk


  • Closed Accounts Posts: 5,019 Kason Elegant Potato


    Check out the deposits thread on askaboutmoney.com (here). Look at the Savings Best Buys (here)

    You will not do much better than the 10 year National Solidarity Bond. 25k will give you 29k after the 10 years. 4k interest free, pathetic really for a 10 year investment.

    If it were me, I would invest most of it, say 24k, in the 10 year bond. 24k will give you ~27,850 or ~3,850 in interest.

    Invest the remaining 1k in something more high risk like p2p investments (Mintos.com etc.), average return of 10% per year after 10 years would give you ~2,750 before tax. Weigh up the risk yourself obviously, as with any high risk investment you may lose your investment completely.


  • Registered Users Posts: 14,543 ✭✭✭✭ Supercell


    We decided to pay down our mortgage early. We agreed an overpayment amount with the bank , the plan being to be mortgage free a couple of years before our eldest turns 18. We can then put aside the mortgage equivalent for college fees etc when the time comes.
    So far its working out quite well. Its also reassuring to know that should ill health strike that our mortgage will hopefully not be an additional stress.

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • Closed Accounts Posts: 5,019 Kason Elegant Potato


    This is another great suggestion if the timing works for you.

    Remember though, you'll have no access to a lump sum if needed. With the 10 year bond, you have access to any investment and interested with 7 days notice.

    A hybrid solution of any of the above suggestions may work for you.
    Supercell wrote: »
    We decided to pay down our mortgage early. We agreed an overpayment amount with the bank , the plan being to be mortgage free a couple of years before our eldest turns 18. We can then put aside the mortgage equivalent for college fees etc when the time comes.
    So far its working out quite well. Its also reassuring to know that should ill health strike that our mortgage will hopefully not be an additional stress.


  • Registered Users Posts: 21 ✭✭✭ Policy Review


    The issue we really need to address here is what exactly the investor is prepared to invest time wise into a save return on the investment. Yes they could pop the money into a retail investment fund but we would need to see growth of between 4-6% to really see decent return due to inflation, management fee & potential allocation etc.

    The An Post strategy is okay but the inflation wont help it much at all. And we are looking for a return here after all. My own approach would be to break up the money and invest in a diversified strategy, all the eggs in one basket could be a bad move and around years 8,9,10 move slowly back into cash to protect what they have earned. Again this is really all dependent on what the investor wants to put in time wise.


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  • Registered Users Posts: 1,490 ✭✭✭ thomasm


    And they’ll lose more value sitting in a deposit account or low interest savings account

    Risk vs reward, if you want to be guaranteed your money at the end then low returns will have to be accepted

    Problem also loving in ten years of low return. ECB rate will rise eventually*

    *assuming Euro does not implode 😄


  • Registered Users Posts: 224 ✭✭ sdraobs


    invest in the kids. you have multiple and i am guessing they are about 8-10years old (10 years to college)

    As in - class trips, private music/swimming lessons. grinds, holidays to disneyland. take time off yourself and spend time with them. private school.

    Alternatively, and if you havent already done so, pay off the mortgage.get an extension to your house for when they have their friends around.


  • Closed Accounts Posts: 11,812 ✭✭✭✭ evolving_doors


    sdraobs wrote: »
    invest in the kids. you have multiple and i am guessing they are about 8-10years old (10 years to college)

    As in - class trips, private music/swimming lessons. grinds, holidays to disneyland. take time off yourself and spend time with them. private school.

    Alternatively, and if you havent already done so, pay off the mortgage.get an extension to your house for when they have their friends around.

    But he still gotta pay for their college!


  • Registered Users Posts: 12,289 ✭✭✭✭ Mad_maxx


    CarChange wrote: »
    Hi all,
    €25k in savings.
    Would like advice on how best to invest it so that it is available in 10yrs to fund college education for kids?

    Obviously would like decent return for fairly low risk.

    What would you do?
    Thanks.

    Half in savings bonds, the rest in the s+p

    You won't grow wealth without some risk so an even split is best


  • Registered Users Posts: 480 ✭✭ FernandoTorres


    It's not really true to say the An Post option is risk-free. There's a risk that inflation picks up over the next 10 years and potentially much better rates would become available while it's locked away. With 25k you can build a decent, diversified portfolio that should at least average 6% p.a. over 10 years.


  • Closed Accounts Posts: 5,019 Kason Elegant Potato


    It's not "locked away". You can exit the fund at any time with 7 days notice.

    Can you detail a low risk portfolio that earns an average 6% / year over 10 years? I would be interested in that for my kids.


  • Registered Users Posts: 12,289 ✭✭✭✭ Mad_maxx


    It's not "locked away". You can exit the fund at any time with 7 days notice.

    Can you detail a low risk portfolio that earns an average 6% / year over 10 years? I would be interested in that for my kids.

    None exists currently


  • Registered Users Posts: 480 ✭✭ FernandoTorres


    It's not "locked away". You can exit the fund at any time with 7 days notice.

    Can you detail a low risk portfolio that earns an average 6% / year over 10 years? I would be interested in that for my kids.


    Correct me if I'm wrong but if you withdraw early you will incur a penalty in the form of a reduced interest rate?



    There's no such thing as a "low risk" product that provides a "decent return" available in Ireland. It's a paradox. It's what everyone says they want but it doesn't exist. I'd argue that if you're funding for your children's education in 10+ years then low risk is not the way to go unless you're extremely risk-averse.


  • Closed Accounts Posts: 5,019 Kason Elegant Potato


    Your post stated that funds would be 'locked away' and you could potentially miss out on better rates. You implied that you would have no access to your funds for the duration of the investment. You were incorrect. Whether interest rates are reduced is irrelevant.


  • Moderators, Home & Garden Moderators, Technology & Internet Moderators Posts: 10,932 Mod ✭✭✭✭ Stoner


    There's no such thing as a "low risk" product that provides a "decent return" available in Ireland. It's a paradox. It's what everyone says they want but it doesn't exist. I'd argue that if you're funding for your children's education in 10+ years then low risk is not the way to go unless you're extremely risk-averse.


    Could you name a medium risk option?


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  • Registered Users Posts: 480 ✭✭ FernandoTorres


    Stoner wrote: »
    Could you name a medium risk option?


    Depends on the persons age, time horizon, other assets, how they would feel about certain falls in their balance etc. All of the major life companies have funds that they would class as medium risk and will charge a high fee for the pleasure. Hence why I recommended that the OP learn themselves. Alternatively speaking to an independent adviser could be helpful.


  • Registered Users Posts: 224 ✭✭ sdraobs


    But he still gotta pay for their college!

    I was looking at the bigger picture as to investing in kids, as opposed to just thinking ill invest in their college when their time comes.

    1. kids might not go to college.
    2. they might not need the OP's funding.
    3. OP might decide not to fund their college in 10 years.

    my experience is that its diminishing returns in terms in investing in kids as time goes on. as in you can shape a 10 year old, less a 20 year old. suppose that's going off-topic and maybe a social forum, not an investments forum. but i think the bigger question has to be considered.


  • Closed Accounts Posts: 11,812 ✭✭✭✭ evolving_doors


    sdraobs wrote: »
    I was looking at the bigger picture as to investing in kids, as opposed to just thinking ill invest in their college when their time comes.

    1. kids might not go to college.
    2. they might not need the OP's funding.
    3. OP might decide not to fund their college in 10 years.

    my experience is that its diminishing returns in terms in investing in kids as time goes on. as in you can shape a 10 year old, less a 20 year old. suppose that's going off-topic and maybe a social forum, not an investments forum. but i think the bigger question has to be considered.

    Ya sure .... but if he had all the money tied up/spent and all his kids DID go to college he'd need to have been prepared.

    Although, I know it sounds crazy but I was reading one thread about a parent who take less of a financial hit by retiring early when her kids were going to college, as they'd qualify for the full grant when she wasn't working. If she stayed on working she would have to borrow a lot just to keep her head above water.


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