Investment/Saving Advice

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fuzzy2

Guest
I am recently married and myself and my wife would like to start looking at making our savings work for us. I am 29 my wife is 28, I have a permanent secure job with pension and earn €42000 p.a. My wife is a public servant (with pension) and earns €78000 p.a. We have no loans and no CC debt. Our mortgage is €330000 with payments of about €1900 p.m. (variable rate). Our house is valued at approx €400000.

I currently save €350 pm into the CU, my wife saves €500 pm. We did have alot of CU savings which were mostly used up on our recent wedding.

My wife also has an AVC and contributes about €150 pm.

My questions are:

We would like to consider having kids in 2-3 yrs and perhaps moving to a bigger home in about 5 yrs. We would like to increase the amount we are saving to about €1200 pm and will need a lump sum deposit for a house move in 5 yrs. Should we invest all or part of this sum? Overpay our mortgage? Increase AVC contributions a little to reduce amount of tax we are paying?
We are prepared to take a degree of risk at this age with investments etc. Would BES schemes be a good idea?

Any thoughts/advice greatly appreciated! We would like to get our money working for us a little better!
 

Brendan Burgess

Founder
Messages
44,873
Hi fuzzy

This is exactly the type of question for which the Money Makeover Forum was designed. It's great to get it. You will probably gets lots of different views.

I would not be putting any further money into a pension for either of you. In fact, I would be scrapping the AVCs - especially your wife's. You have good pension schemes at the moment. You are entering into a very expensive stage of your life, I would have as much money available as possible now. At a later stage, your wife may get better value by buying years service rather than paying AVCs.

My main concern is the size of your mortgage. It is not a problem now as you have income of €120k a year. But if your wife wants to take a career break when the kids are born, then your mortgage will be way out of line with your income. For that reason, I think that increasing your monthly mortgage payments is probably the best and safest idea.

You may decide that you want the psychological comfort of having a nest egg rather than a smaller mortgage. In that case, you should build it up in a unit linked fund, such as Quinn Life. I would avoid a BES Scheme as I think you need the flexibility. Kids may arrive earlier than you planned or the house of your dreams may become available and you want to move fast. You don't want to have your money tied up in a pension scheme or a BES scheme. I would recommend an equity based unit linked fund. The value may go down, but the longer the holding period, the less likely that is to happen.

I don't get the following bit:

will need a lump sum deposit for a house move in 5 yrs.

It will be helpful to have a deposit, but you will probably have that from the equity in your home. You could say, that you have a €70,000 deposit at the moment.
 

Sue Ellen

Moderator.
Messages
8,350
Would it not make more sense for a house husband in this situation rather than a career break. At nearly half the salary surely it would be a better financial option?
 
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fuzzy2

Guest
Thanks for the replies and advice guys.
My thinking in needing a lump sum was towards deposit/stamp duty but I see your point re. equity in house!

Also Sue ellen you are right it is me that would be looking at going part time / reducing hours if we are lucky enough to have children, hence why we would like to get used to saving/investing a fair amount so that whena reduction in salary comes we are used to living on a little less!
 

Purple

Registered User
Messages
11,573
I think Brendan's advice is spot on. Another point in favour of savings of the type suggested is that you may wish to replace a car when children arrive. This can use up a big chunk of cash and credit for cars is expensive.
Do you have an allowance for holidays etc in your budget? A break, even for a weekend, is also more important when you have young kids.
 
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