Borrowing lump sum on children's allowance ?

I

iMax

Guest
Hi all,

New to the forum. Quick question. My daughter who is three has approx €8k in a standard AIB bank account, due to us not touching her children's allowance from day one. We have no intention of touching it as we want it to be the start of a college fund for her (or whatever when she gets to that age).

By my reckoning, by just sitting there she will have nearly 40k at age 18, which is nice but not great. However if we switch her to AIB's 7 day notice account she would have about 60k - even better, so we were going to do this, however, now I'm thinking would it be better to borrow say 50k from the bank & invest that now in a long term account with the monthly children's allowance payment paying back the loan & thereby hopefully making about 100k for her by age 18 ? (God knows how much 100k will be actually worth by then!)

Would this be possible or even adviseable ?
 
For an investment term of presumably c. 15 more years you should at least consider putting some if not all of the money into a low charges unit linked equity fund which would be expected to significantly outperfrom deposit interest rates over the long term.

If you do insist on sticking with deposits then you can significantly increase the interest earned by mixing and matching a number of lump sum demand/term and regular saver accounts. See the Financial Best Buys forum and www.itsyourmoney.ie lists of such accounts/rates on offer and the many existing threads on mixing and matching such accounts to maximise interest returns.
 
Thanks for the info clubman. This is my problem. I want to do the very best I can for her but have no idea where to start (hence it being in a normal deposit account right now)
 
You should start with the key posts in this forum (including the AAM Guide to Savings & Investments) and the consumer guides on www.itsyourmoney.ie in my opinion so.

Bear in mind that it probably makes little sense to borrow to invest as your are asking about in your first post.
 
In broad terms, what you're suggesting is that you borrow to invest. If you can find an investment that will give you a return net of all charges and taxes that is greater than the interest on the borrowing, you'll come out ahead. If not, you won't. Borrowing to invest is generally considered a fairly high-risk strategy.
 
You must log in or register to reply here.
Back
Top