Q I want to invest between €10,000 and €12,000 instead of it sitting dormant in my current account. Is it a good time to invest seeing that we are potentially facing a global recession? I know we need to ride out the storm so I am committed to a five to 10-year investment horizon.
A It is impossible to recommend specific investments to anyone without knowing a lot about their financial circumstances, said Liam Ferguson of financial brokers FergA.com. An investment that might be suitable for you might not be right for your neighbour. Before thinking about moving money out of a current account into an investment, look at the alternatives first. Have you maximised tax relief on pension contributions? Have you paid off all expensive debt, like credit card debt? If not, give those priority, Mr Ferguson said.
Then you need to establish how much risk you are willing to accept with your money. As a general rule, investments that are very low risk or capital secure offer correspondingly low returns.
Given that interest rates are on the rise, it is likely that State Savings products and deposit accounts may start offering a better rate of interest again in the coming months (albeit less than inflation), so if your tolerance for risk is low or you are looking for capital security, it might be worth waiting for a few months to see what rates emerge, he said.
Both AIB and Permanent TSB act as sales agents for Irish Life products and Bank of Ireland only sells New Ireland products, so you will only get advice from them on what their linked company has to offer. If you ask a trusted friend or relative for a recommendation of a financial broker, you will get advice on a far wider range of investment products and funds and not just one company’s offerings.
Q I own a second home in a small country town that is worth about €150,000. I have three children in their late 20s who will need help buying a house as none of them are high earners. My plan is to use this house to help them with a deposit so I wonder if there is any benefit to them financially if I sign the property over to them for them to sell when they need the money. Or should I sell it myself and divide the money between them?
A If you transfer the house to your children now, they will have to pay stamp duty of 1pc on the value, according to solicitor Susan Murphy of MakeMyWill.ie. Plus, if the value increases by the time they sell it, they may incur capital gains tax.
There is also the potential for conflict if one wants to sell and the others do not, she said. It would be a lot cleaner to just sell it yourself and divide the money, but do some research in the area to see if now is a good time to sell. If you are reluctant to put it on the market just yet, but still want the peace of mind that they will get the benefit, Ms Murphy suggests you talk to your solicitor about updating your will to reflect your wishes.
Q I feel I am really awful with money and it is not inflation related. How can I become a better saver?
A Acknowledging that you are not blaming inflation for your lack of savings means you have given this some thought, says Frank Conway, founder of financial wellbeing provider MoneyWhizz and a qualified financial adviser. You are off to a great start.
Identify your financial means as this will be critical to achieving any financial goals you may have in mind
To reach any life goal, be it saving for a short-term need, planning for a life event, investing for retirement or something else, it is important to identify where you are presently. In addition to identifying your present situation, it is equally important to identify your financial means as this will be critical to achieving any financial goals you may have in mind. So, with this in mind, the first step is to identify your goal.
Maybe you want to have some financial security by building up an emergency fund. Regardless, you need to give your savings habit purpose. Next, identify your means. You need to just make sure you goal is aligned to your financial capacity. If you plan to save €6,000 in one year, you need to save at least €500 each and every month.
However, if your monthly expenses (rent, transport, food, heat and so on) means the most you can save is €200, then your means will not support your goal. Here, it is important to align your goal to your means.
Finally, remove yourself from the equation. You should have a savings account that is separate from a current account/debit card. This way, temptation on a night out to raid your fund is out of reach.