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Long term investment for kids school/college

  • 10-11-2019 7:33am
    #1
    Registered Users Posts: 11,710 ✭✭✭✭ Interested Observer


    Will start out by saying I'm a total beginner with this sort of thing so if anyone is willing to offer advice please do an ELI5 version :o

    I have two young kids and I'm thinking of putting money away for when they hit school/college age. The intention would be to leave the investment for at least 10 years, and to invest the child benefit + a small topup.

    I'm aware than banks offer investment products but I presume the fees the bank charge will eat into whatever money you might make.

    I know there are other products like index funds or EFTs (my understanding of these is minimal at best) so is there an easy way to invest in these things without the bank taking a cut? I presume I'd have to deal with the tax implications then at the other end? Is it a good idea even?

    Any help/advice appreciated.


Comments

  • Registered Users Posts: 3,337 ✭✭✭ dubrov


    Sign up to DeGiro. Pick a fund with low fees, buy it and leave it alone. I'd recommend one that tracks one of the larger well known equity indices like the FTSE100.

    You could also diversify if you wanted by buying a range of funds in different sectors.

    Just check the fees on the funds before buying. Some are very low (0.1%).


  • Registered Users Posts: 11,710 ✭✭✭✭ Interested Observer


    dubrov wrote: »
    Sign up to DeGiro. Pick a fund with low fees, buy it and leave it alone. I'd recommend one that tracks one of the larger well known equity indices like the FTSE100.

    You could also diversify if you wanted by buying a range of funds in different sectors.

    Just check the fees on the funds before buying. Some are very low (0.1%).

    Thanks, I will sign up. Does this lend itself to continually putting money in on a monthly basis?

    I've set up the account and transferred them their single penny so in a few days I'll be able to see what options are available.


  • Registered Users Posts: 3,337 ✭✭✭ dubrov


    I don't have an account with them but from looking at them previously, they had very cheap execution fees It might be worth spreading your investment with a few online brokers to cover yourself but I would start with DeGiro

    You can load money into your account as you have it. Just check the fees on what you are buying as some assets may have a flat purchase/entry fee which would make them unattractive to small purchases


  • Registered Users Posts: 3,054 ✭✭✭ Static M.e.


    Not an expert by any stretch of the imagination but I have looked into this previously.

    All the advice I could find was that the putting your Child Benefit, even with a small top up, isn't worth it. You are better off saving your Child Benefit (+Top up) and then purchasing an EFT when you have accumulated €1000 or more for a single purchase. In Ireland, we do not have any Child friendly, investing\saving accounts like they do in the US or the UK, where most of the conversations are happening.

    Although, it is difficult to hear when you are trying to do a good thing for your kids, what you will be likely be told is that you are better off overpaying your Mortgage. This will reduce the amount of money you owe in the future at which point you can save for your kids’ education etc. Although I understand the logic behind it, and it's correct, I still find it difficult to do it.

    Where I have left it now is that I have picked the Vanguard FTSE All World UCITS EFT - Accumulating version - which has a ticker of VWCE. Vanguard are known for having the low fees and that is something that you need to watch out for as over the long term something as low as even a 1% fee will eat away large parts of your gains. If I was to invest, I would use Degiro and then make a single purchase every 6 months or so when you had enough money saved up. I would also make sure that when I did purchase the EFT, it was one of the ones that they offer you free trades on (1 a month and must be greater than €1000). Finally, I would spend the next 6 months reading up on the "Deemed Disposal" rule and on EFTs \ Investing in General so that you know what you are getting into. Again, remember that most of the conversations that you read on the Internet are based on the US or the UK which have completely different investing and tax models, which don't make as much sense for Ireland.


  • Registered Users Posts: 11,710 ✭✭✭✭ Interested Observer


    Not an expert by any stretch of the imagination but I have looked into this previously.

    All the advice I could find was that the putting your Child Benefit, even with a small top up, isn't worth it. You are better off saving your Child Benefit (+Top up) and then purchasing an EFT when you have accumulated €1000 or more for a single purchase. In Ireland, we do not have any Child friendly, investing\saving accounts like they do in the US or the UK, where most of the conversations are happening.

    Although, it is difficult to hear when you are trying to do a good thing for your kids, what you will be likely be told is that you are better off overpaying your Mortgage. This will reduce the amount of money you owe in the future at which point you can save for your kids’ education etc. Although I understand the logic behind it, and it's correct, I still find it difficult to do it.

    Where I have left it now is that I have picked the Vanguard FTSE All World UCITS EFT - Accumulating version - which has a ticker of VWCE. Vanguard are known for having the low fees and that is something that you need to watch out for as over the long term something as low as even a 1% fee will eat away large parts of your gains. If I was to invest, I would use Degiro and then make a single purchase every 6 months or so when you had enough money saved up. I would also make sure that when I did purchase the EFT, it was one of the ones that they offer you free trades on (1 a month and must be greater than €1000). Finally, I would spend the next 6 months reading up on the "Deemed Disposal" rule and on EFTs \ Investing in General so that you know what you are getting into. Again, remember that most of the conversations that you read on the Internet are based on the US or the UK which have completely different investing and tax models, which don't make as much sense for Ireland.

    Thanks for the response.

    In terms of overpaying the mortgage, I'm not sure this makes sense in terms of what I'm trying to do. I still have the guts of 30 years left on it so I'd need to literally be knocking decades off it in order for this to work, which I'm not really sure I'd be able to do.

    I think I'll attempt to do what you suggest in terms of the EFT, I'll try it out at least to see how successful or otherwise I am. My wife is still on maternity leave and this is a plan for when she goes back to work, so I have a couple of months to try and read up on this stuff. Don't suppose you know of any decent resources?


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  • Registered Users Posts: 3,054 ✭✭✭ Static M.e.


    Asking questions here is a good place to start otherwise here are some places to check out.

    Off the top of my head these are worth looking at, in no particular order.

    Ask about Money or AAM - Irish oriented.
    https://www.reddit.com/r/Bogleheads/ - Bogleheads, generic, but they have an Irish section. I can't recall the main site.

    This is again an Irish Blogger, (s)he hasnt posted much but the content is very good. I wish they would post more.

    https://anirishinvestorsguide.wordpress.com/

    On Overpayments, pop your details into this calculator to give you an indication of the amount of time you could cut off. You could take 10 years off the mortgage..

    https://personalbanking.bankofireland.com/borrow/mortgages/calculators/overpayments-calculator/

    Degiro Commission free eft list.
    https://www.degiro.ie/data/pdf/ie/commission-free-etfs-list.pdf

    EU personal Finance
    https://www.reddit.com/r/eupersonalfinance/

    The JL Collins Stock series is worth a read
    https://jlcollinsnh.com/stock-series/

    If I think of anymore I'll post them tomorrow for you.


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