Ask Siobhan: Help needed to find safe home for a cash windfall
I have recently received money from a relative. I have never been in a position before where I have a large amount to save or invest, so I am unsure what my options are.
My mortgage is paid in full, so I am planning on spending some money on home improvements, but I will still need to make a decision on what do with the rest. I don't know a lot about the different type of investment options, but I think now might be a good time to learn. Are there any 'safe' investments?
It is a good idea to take time to consider all your options, before deciding what to do with your money. You don't say if you have any outstanding debts, for example credit card debt or an overdraft, but if you do, you might consider paying off some or all of your debts first as this will save you money. You will save money on the interest repayments of your debt, often more than you would earn from saving the new sum.
There are a few questions you need to ask yourself to help you decide if saving or investing is the best option for you.
With a savings product, you don't risk losing your lump sum, but they generally offer a lower return than investment products. Investment products on the other hand tend to have a higher return, but do have an associated risk and may have charges that you need to be aware of.
You will have to pay Deposit Interest Retention Tax (DIRT) on any interest earned on savings and an exit tax on money you make from investing.
Consider also if you will need access to your money. Some savings accounts such as fixed-term deposit accounts offer an attractive rate of interest if you leave your money in until the end of the term, usually one, three or five years. If you withdraw your money before then, you may lose some or all of the interest.
I would strongly recommend that you get independent financial advice from an authorised financial adviser.
You can check if an adviser is authorised by contacting the Central Bank.
The National Consumer Agency's website, www.consumerhelp.ie, also gives a useful overview.
Siobhán Howe works with the National Consumer Agency. firstname.lastname@example.org