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Savings a/c for children

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  • 06-09-2020 7:33pm
    #1
    chases0102
    Registered Users Posts: 1,034 ✭✭✭


    Hi folks,

    Does anyone have any advice re the above? Was thinking of setting up a Zurich investment a/c for our kids - low risk, managed for an annual fee - as the Post Office/Credit Union return is absolutely abysmal, as is any bank.

    Just to save for their education.

    Many thanks


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    #2
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭pwurple


    chases0102 wrote: »
    Hi folks,

    Does anyone have any advice re the above? Was thinking of setting up a Zurich investment a/c for our kids - low risk, managed for an annual fee - as the Post Office/Credit Union return is absolutely abysmal, as is any bank.

    Just to save for their education.

    Many thanks

    We did a few of these when we were small and then figured out that overpaying the mortgage by the same amount so we were debt free by college time made more sense on paper.


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    #3
    chases0102
    Registered Users Posts: 1,034 ✭✭✭chases0102


    Yeah, absolutely....unfortunately for us we are only 2 years in to a 30 year mortgage! We are overpaying by 10% though, so there is that....!!!


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    #4
    Heres Johnny
    Closed Accounts Posts: 2,738 ✭✭✭Heres Johnny


    chases0102 wrote: »
    Hi folks,

    Does anyone have any advice re the above? Was thinking of setting up a Zurich investment a/c for our kids - low risk, managed for an annual fee - as the Post Office/Credit Union return is absolutely abysmal, as is any bank.

    Just to save for their education.

    Many thanks

    If you're willing to go in for 10 years or more it's a great idea. Just check the competition though for charges, all life insurance companies offer these funds. Just make sure you've other things sorted first, life insurance first then your own pensions. Savings funds come after those in my opinion.


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    #5
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭pwurple


    chases0102 wrote: »
    Yeah, absolutely....unfortunately for us we are only 2 years in to a 30 year mortgage! We are overpaying by 10% though, so there is that....!!!

    Not unfortunately at all. The start of a mortgage is the most effective time to overpay, that’s when you are loaded with interest.


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    #6
    [Deleted User]
    Posts: 0 ✭ [Deleted User]


    pwurple wrote: »
    Not unfortunately at all. The start of a mortgage is the most effective time to overpay, that’s when you are loaded with interest.

    His point being no matter what he will still have the mortgage repayment when they start college etc.

    So if he overpays loads and doesnt save he will still have the mortgage and no money aside for expenses which is not a good plan.

    Personally I think its a bad strategy to not save/invest to have a lump sum when they start college - even if you manage to clear the mortgage you still may not have any lump sum of money aside for upfront expenses etc. Even saving the child benefit for 18 years will have a nice pot of 30k come college time, more if it's invested. No brainer to me to at the very last put the child benefit aside.

    I'm not saying dont overpay if you can afford to but I would not see overpaying as something towards college expenses and if it was one or the other I'd see it as a far better move to save up a healthy college fund than put it all into a mortgage or pension where it's tied up and you cant actually access any of funds when needed.


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    #7
    heffo500
    Registered Users Posts: 963 ✭✭✭heffo500


    Low Risk equals low return. You would be lucky to beat inflation over the course of the investment.

    How long will you be investing for?

    I would recommend setting up a Custody Degiro Dealing Account and buy a low fee/cost ETF that will track the world economy as a whole or the US economy.


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    #8
    chases0102
    Registered Users Posts: 1,034 ✭✭✭chases0102


    Thanks for all that info folks.

    Yes, lucky to be in a situation that I can overpay, but as one poster said, this is about having funds there for my kids for when they turn 18. We’ll still have the mortgage, so I want to be proactive and have something there for them at that stage of their life. We can out most of the CB away, if not all, and again lucky that we are in a position to do so. I have a pre2011 PS pension, but haven’t yet tried to supplement it. Wife has her own PRSA too.

    I suppose “long term, low risk” may not expect huge returns, but I am conscious that this money is very important to their future, so I don’t wish to be too risky/aggressive. Just would like to best inflation/get something more than the Post Office or Credit Union for it.


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    #9
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭pwurple


    Allyson Scary Typist wrote: »
    His point being no matter what he will still have the mortgage repayment when they start college etc.

    So if he overpays loads and doesnt save he will still have the mortgage and no money aside for expenses which is not a good plan.

    I get that, but that is exactly how we got our 30 year mortgage down to a ten year mortgage, doing the overpayment at the start and reducing the term. We started saving later, when salary increased.

    If you've got 2 year old, you've got 16 years before college. Overpaying by 300 a month for example, could take 8 years off a 300k mortgage, and save 41k in interest.

    https://aib.ie/our-products/mortgage/mortgage-overpayment-calculator#

    I think it's also fairly reasonable that over those 16 years your salary should increase. If you want to save say 20k in 16 years time, you can start doing that in 8 years... and pay down the mortgage now.

    If you do it the other way around (save first 8 years, then mortgage overpayment for the next 8), it's less financially efficient. You lose in terms of the spending power of your savings eroding while it sits unused waiting, and you also lose out because you are paying that heavy front-loaded interest on the mortgage while you build those savings.


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    #10
    chases0102
    Registered Users Posts: 1,034 ✭✭✭chases0102


    pwurple wrote: »
    I get that, but that is exactly how we got our 30 year mortgage down to a ten year mortgage, doing the overpayment at the start and reducing the term. We started saving later, when salary increased.

    If you've got 2 year old, you've got 16 years before college. Overpaying by 300 a month for example, could take 8 years off a 300k mortgage, and save 41k in interest.

    https://aib.ie/our-products/mortgage/mortgage-overpayment-calculator#

    I think it's also fairly reasonable that over those 16 years your salary should increase. If you want to save say 20k in 16 years time, you can start doing that in 8 years... and pay down the mortgage now.

    If you do it the other way around (save first 8 years, then mortgage overpayment for the next 8), it's less financially efficient. You lose in terms of the spending power of your savings eroding while it sits unused waiting, and you also lose out because you are paying that heavy front-loaded interest on the mortgage while you build those savings.

    Yeah, makes sense. We are on a fixed rate (for next three years or so), so overpaying by 10% is all that is allowed.


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    #11
    heffo500
    Registered Users Posts: 963 ✭✭✭heffo500


    chases0102 wrote: »
    Thanks for all that info folks.

    Yes, lucky to be in a situation that I can overpay, but as one poster said, this is about having funds there for my kids for when they turn 18. We’ll still have the mortgage, so I want to be proactive and have something there for them at that stage of their life. We can out most of the CB away, if not all, and again lucky that we are in a position to do so. I have a pre2011 PS pension, but haven’t yet tried to supplement it. Wife has her own PRSA too.

    I suppose “long term, low risk” may not expect huge returns, but I am conscious that this money is very important to their future, so I don’t wish to be too risky/aggressive. Just would like to best inflation/get something more than the Post Office or Credit Union for it.

    I would look at MSCI World Exchange Trade Fund ETF. Very low fees and easily purchased and can be sold without penalty. This will simply track the performance of the world economy.

    My family had a savings account for me as a child and if they had of done something similar I would have had a lot more for college.

    I can explain the process further if you wish.


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    #12
    heffo500
    Registered Users Posts: 963 ✭✭✭heffo500


    chases0102 wrote: »
    Thanks for all that info folks.

    Yes, lucky to be in a situation that I can overpay, but as one poster said, this is about having funds there for my kids for when they turn 18. We’ll still have the mortgage, so I want to be proactive and have something there for them at that stage of their life. We can out most of the CB away, if not all, and again lucky that we are in a position to do so. I have a pre2011 PS pension, but haven’t yet tried to supplement it. Wife has her own PRSA too.

    I suppose “long term, low risk” may not expect huge returns, but I am conscious that this money is very important to their future, so I don’t wish to be too risky/aggressive. Just would like to best inflation/get something more than the Post Office or Credit Union for it.

    I would look at MSCI World Exchange Traded Fund ETF. Very low fees and easily purchased and can be sold without penalty. This will simply track the performance of the world economy.

    My family had a savings account for me as a child and if they had of done something similar I would have had a lot more for college.

    I can explain the process further if you wish.


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    #13
    chases0102
    Registered Users Posts: 1,034 ✭✭✭chases0102


    Just about to pull the trigger on a Prisma 4 Savings fund, from Zurich - just wondering if anyone else had experience with this?


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