Advice on strategy to manage term deposits over a number of years.

[advice pls]

Hope the title gives an idea of what I want to ask.

I save an amount each month not a lot but it is with the intention of having it when my children are older. After the first year of regular saving I put the amount into the state savings for three years. I had hoped to do the same this year and next and then add what was saved to the amount maturing that year and re deposit and so on. The idea was each year some would become available if our circumstances changed.

However with this rate no longer a best buy I'm not sure how to proceed or even if this is worth doing. Does it make sense to save like this? Is there a better strategy that I'm missing. I'm restricted by products as some require €3 or 5k to open and it's not that big an amount at the moment.

 

[Brendan Burgess]

You can't get a complete answer without complete information.

For example, if you have an SVR mortgage on your home, it may make more sense to pay this off instead.

If you are saving long term and want access, you are probably better off buying shares rather than put your money into deposits.

 

[advice pls]

Sorry Brendan should have been more clear.

We have an SVR and are working on that as well as ensuring there is sufficient rainy day money. This is purely for our children to put towards further education if they wish or for anything else that might come up. The once a year access idea was just if something big did come up we could replace our rainy day money.

Would there not be too little to put into shares? For example last year and this would be around €2000 each. I would estimate next year to be similar. The following year we would have the original amount available from the state savings in addition. I have used the best buys thread to ensure the regular saver accounts are good value and swap if they reduce.

 

[Brendan Burgess]

What is the rate you are paying on your mortgage? 4.5%

What are you getting on your savings? 3% and falling. In addition, you are taking the risk that your savings will be wiped out by a bank bust or by a state default or a euro collapse. There is simply no need to take this risk.

You should use any surplus to make advance payments on your mortgage.

• You will pay less interest than you would earn from your deposit
• Paying down a mortgage is absolutely safe - money on deposit anywhere has some element of risk.
• Your mortgage will be smaller giving you more flexibility -e.g. if you wanted to remortgage for a better rate because you have a lower LTV
• There is a great comfort in having a smaller mortgage - although there is also comfort in having cash.
• If you need the cash after a few years, you will have much lower mortgage repayments and you may be able to take a break in your mortgage payments.

You might want a small rainyday fund of €1,000 now, but any more than that will be expensive because you are borrowing at 4.5% to put money on deposit at, probably 2%.