Lump sum investment

C

Cathbarr

Registered User
Messages
80
Personal details

Age: 38
Spouse’s/Partner's age: 38

Number and age of children: 2 (7&9)

Income and expenditure
Annual gross income from employment or profession: 60k approx
Annual gross income of spouse: 75k

Monthly take-home pay; 6300

Type of employment: e.g. Civil Servant, self-employed
- Public sector (me)
- private sector (spouse)

In general are you:
(a) spending more than you earn, or
(b) saving? Saving more than spending


Summary of Assets and Liabilities
Family home worth €450k with 47k remaining (repayments are €910 per month with 5 years left. Due to receive some cash from parents so it could be paid in 3 years)

Other borrowings – car loans/personal loans etc: spouse has car loan of 350e per month

Do you pay off your full credit card balance each month? Yes

Other savings and investments:
Approx 15k in bank
2 investment funds with Zurich (1 worth approx 8k - we pay children's allowance into this monthly, 1 worth approx €500e, I've only recently started paying AVCs to allow me to retire at 60)

Do you have a pension scheme?
- Public sector pension with additional avc
-spouse has private pension


What specific question do you have or what issues are of concern to you?
My kids grandparents would like to gift them some money (approx 20k) to save for adulthood.(could be used towards college, a car etc..) The money could sit in their credit union accounts but it will earn nothing there so I'm just looking for suggestions on what to do with it. We could put it into the investment we have for them but I'm not sure would that be the best thing to do with it.

I'd rather not use to pay down debt either (spouse car loan)
 
Cathbarr said:
Other borrowings – car loans/personal loans etc: spouse has car loan of 350e per month

Other savings and investments:
Approx 15k in bank
2 investment funds with Zurich (1 worth approx 8k - we pay children's allowance into this monthly, 1 worth approx €500e, I've only recently started paying AVCs to allow me to retire at 60)

I'd rather not use to pay down debt either (spouse car loan)
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You don't give sufficient details of the car loan (amount and term outstanding and interest rate) but it generally doesn't make sense to have the existing savings/investments while borrowing for a car.
 
Not what you asked (and no help re investing it, but following that part with interest) but would they each gift each child 3k per year (so 6k per child per year) over the next 3-4 years and thus avoid tax implications, particularly if kids won't need it immediately
 
ClubMan said:
You don't give sufficient details of the car loan (amount and term outstanding and interest rate) but it generally doesn't make sense to have the existing savings/investments while borrowing for a car.
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Totally appreciate this but we don't want to use the money to pay for the car. We are happy to keep paying the car loan. I totally appreciate the interest rates are higher than what we earn but would rather keep the money aside for the kids.
 
Cathbarr said:
Totally appreciate this but we don't want to use the money to pay for the car. We are happy to keep paying the car loan. I totally appreciate the interest rates are higher than what we earn but would rather keep the money aside for the kids.
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I'm not referring to the "childrens'" money.
I'm referring to the fact that you have existing savings/investments but are borrowing to buy a car.
That simply makes no sense unless it's a very very cheap loan.
Also, this compartmentalising of finances rather than taking a holistic view is a classic mistake that many people make.
 
ClubMan said:
I'm not referring to the "childrens'" money.
I'm referring to the fact that you have existing savings/investments but are borrowing to buy a car.
That simply makes no sense unless it's a very very cheap loan.
Also, this compartmentalising of finances rather than taking a holistic view is a classic mistake that many people make.
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Sorry. Appreciate your thoughts. But again we won't be using our savings to pay off the car.

My question was to do with what to do with the lumpsum investment however.
 
Yes - but it's the Money Makeover forum so people are going to look at the overall picture and offer feedback on that basis.
Borrowing while saving generally makes no sense.

With regard to the "childrens'" money, given that the investment timeframe would seem to be at least a decade, it makes sense to at least consider an equity based investment. There are low charges unit linked funds which some people might find convenient but direct share investment is more efficient from a tax and charges point of view.
 
It actually makes no sense from an overall family point of view to have a short term car loan at, say, 10% with other money on deposit at, say, 1% or so. The family is losing on a nett basis. I get that you don't want to shortchange the kids on their grandparents gift and that's admirable. So how about this approach:
1. Put the kids money into an account
2. "Lend" it to yourselves and pay off car loan (and any other shirt term loans)
3. "Repay" it with the same interest rate and repayment that you would otherwise have made to the car loan lender.
4. As and when the loan is repaid, switch the funds to more long term investments. I would go with what @ClubMan said about low cost funds and direct equity investment.
 
Right Winger said:
It actually makes no sense from an overall family point of view to have a short term car loan at, say, 10% with other money on deposit at, say, 1% or so. The family is losing on a nett basis. I get that you don't want to shortchange the kids on their grandparents gift and that's admirable. So how about this approach:
1. Put the kids money into an account
Click to expand...
But they don't have to touch the childrens' gifted money at all. They already have savings/investments that can be used to pay off or reduce the car loan.

BTW, depending on the actual amounts involved, gift/capital acquisitions tax on the money from the grandparents may need to be factored in.

Gift and Inheritance Tax (Capital Acquisitions Tax – CAT)

This page gives a general overview on CAT implications on gifts and inheritence.
www.revenue.ie www.revenue.ie
Edit: I see that @SayWhat? already mentioned the potential tax issues above.
 
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