What to do with savings?

P

Plumbob

Guest
Hi, I'm new to the forum and this is my first post, I'm hoping for some advice. I'm in a fortunate position at the moment where I am managing to save 900euro a month for around about the last year or so. At the moment it's just being lodged into a credit union account. I have around 10,000 euro saved so far. I'm wondering should I be saving this somewhere where I'll get a better return or even should I be paying more off my mortgage instead. I've got a 30 year mortgage for 250.000euro with 27 years left at a Tracker rate of 1.8%. Should I be doubling up my mortgage payments so I can get it paid off sooner or what do you think I should be doing? Any help would be appreciated.
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It all really depends on what you want to achieve, what your financial outlook is and what you are comfortable with.

Generally it is considered prudent to have a multiple of your monthly paycheck in accessible savings, some would suggest three months, others more or less.

The points you probably need to consider Plumbob are (in no particular order!):
1) Return
2) Accessibility
3) Security
4) Objectives for using the money (long, medium and short term big ticket expenditure)

If you can get a savings rate that is higher than your mortgage interest then you may get a better return from saving the money rather than spending it on reducing your mortgage.

Locking a lumpsum into a fixed return scheme (such as the national solidarity bond for example) may mean a better return if you stay the distance but penalties if you try to exit early. It may also be that the rate which is attractive this year is less so next year.

If you pay down your mortgage that money then becomes inaccessible to you as you will have to re-borrow to retrieve it, however, if you pay down your mortgage then you can either reduce your term or your monthly outgoing and reduce the overall cost of your mortgage.

Generally (though this is not a hard and fast rule), the riskier the investment the higher the potential return (and the greater the potential loss). So the level of risk that you are willing to take may limit your options.

You also have to think about what you want to do with your money. As in the objectives you may have over the next five or ten years that your savings may be used for (children, cars, furnishings, holidays, education, etc).

Start by thinking about what your objectives and risk strategy are, what proportion of your lump-sum do you need to be readily accessible and what proportion you believe you won't need in the medium term. These will allow you to start looking at specific types of products tailored for what you wish to achieve. Then start looking at the different options available, www.itsyourmoney.ie has comparison charts for different savings options that might help.
 
Best option for your savings is in savings bonds. Savings bonds are issued by the U.S. government and are backed by its full faith and credit. Similar to CDs, savings bonds have a maturity date set in which the bond reaches the maximum value.
 
Seozip76, this is an Irish site, is buying American government bonds a simple matter in Ireland?
 
Plumbob... If I were you I would lodge the 10K into Rabo and keep it as a rainy day fund to pay your mortgage should you end up out of work..
Also if you can regularly save 900 per month.. then I would open the regular saver with PTSB as best reg saver at moment
Best of luck
 
Unless you need access to credit, saving with the credit union is a bad idea. Each Credit Union differs, but my local one has not paid a dividend for 2 years (0% interest).

There are instant access savings accounts out there with lots of institutions offering 3%+
 
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