# Need advice on investing the savings



## nivakr (4 Feb 2021)

I'm mainly looking for any suggestions on how to invest our savings with  a few changes coming our way. We signed contracts to buy a house and also are expecting a baby. Questionnaire below:

Age: 30
Spouse’s/Partner's age: 30

Annual gross income from employment or profession: 80,000
Annual gross income of spouse: 50,000

Monthly take-home pay : ~ 6600 (after some deductions to purchase company shares, pension contributions)

Type of employment: e.g. Civil Servant, self-employed : Both in private sector PAYE

In general are you:
(a) spending more than you earn, or
(b) saving? saving but never calculated how much exactly

Rough estimate of value of home : haven't bought one yet, currently renting (rent:1200pm) but will soon move into one costing ~ 340,000 EUR (10% deposit paid)
Amount outstanding on your mortgage: FTB so 90% will be outstanding
What interest rate are you paying? probably ulster bank 2.4%

Other borrowings – car loans/personal loans etc None

Do you pay off your full credit card balance each month? yes
If not, what is the balance on your credit card?

Savings and investments: 
cash: 50,000
Stocks (employer shares, other large cap tech shares with broker etc.) : 80,000

Do you have a pension scheme?Yes
Mine: ~77,000 (employer contributes 5% and I try to put AVCs to avail the max tax benefit)
Spouse: 22,000 (started contributions only recently, plan to bump it up atleast for 2020 to get max tax benefit, employer gives 8%)

Do you own any investment or other property? None

Ages of children: expecting a baby this summer

Life insurance: employer provides 4x our base salaries

What specific question do you have or what issues are of concern to you? 
1. My plan is to maximize pension contributions to avail of the full tax relief and then overpay mortage repayments with any remaining savings. Is that the right course of action or am I better off investing in stocks without overpaying mortgage.
2. Are there any better ways to save for the baby's future (expenses, education etc. )

Thanks a million!


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## _OkGo_ (4 Feb 2021)

You are in pretty good financial health with a very good combined income at 30. You are sensibly buying a reasonably priced property so your LTI is <2.4 even at 90% LTV. So you have approximately €130k between cash and shares. In your shoes I would do the following:

€34k to bring your LTV down to 80% and avail of the 2.2% rates
€15k for backdated 2020 AVC's (or whatever the figure is to max both pensions)
Take out a 35 year mortgage term but overpay as much as possible. Helps cashflow by reducing the minimum monthly payment that you have to make.
Budget for and retain any cash savings to cover unpaid maternity/paternity leave that you plan to take. If you factor in the cost of childcare vs unpaid leave, it won't actually cost you much. You can comfortably afford it so it is well worth taking advantage of it
Budget for and start buying what you need for the baby. Travel systems are surprisingly expensive 
Budget for furnishing your home. Depending on the finish, you can spend a lot decorating and buying furniture particularly as FTB. As a side note, if this is a new build, you should obviously be availing of the help to buy scheme
Sell off any stock you have in your own company. It is generally a good idea not to have all your eggs in one basket (income and shares)
Decide if you are paying for childcare once you are both back working and factor it into your monthly expenses
Once you are comfortable with your future costs, use any excess savings to pay down the mortgage
Other than that, you really don't need to worry about saving for your baby's future. If you continue maxing both pensions, you could comfortably have 400-500k combined pension pots and have the majority of your mortgage cleared by the time you are 40. You will more than likely be earning more and have a lot of excess cash in your 40's that you can save towards education at that point so don't go stashing the child benefit in the credit union, use it to clear the mortgage.


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## nivakr (4 Feb 2021)

Hi OkGo, thanks a lot for the detailed response. We're not based in Dublin, so that helped a good bit with the reasonable price of the property I guess. I have never posted here before but was following the guidance posted on this website for a while, which has been very helpful. Now with the baby and the new house, I was curious if we should change something re. our investments. Looks like we need to continue doing the same (maximize pensions, and overpay mortgage where we can).

Re. mortgage, still considering whether to go with BOI for 1yr get the 2% cashback with 90% LTV and switch to ulster (possibly get below 80% LTV to get the lower rate) or just go with ulster directly. Taking the cashback (plus mortgage saver) gives about €6k extra (even after the extra interest), which is a nice sum. Seems like a no brainer to take the extra cashback but not sure if I'm missing something.
Yes, plan is to contribute to 2020 AVCs for both of us.
Definitely planning to take unpaid maternity and maybe paternity leave, not sure of this one yet. Need to think through. We were saving for the deposit and with HTB, we got to keep most of this cash. So, we should be able to afford the unpaid leave.
I agree re travel systems, just started checking and they are not cheap! On this front, with the baby, we have no idea how much our expenses will increase.
Its a new build and we are getting the HTB, budgeting 15k for the furniture etc (flooring and all included in the build price)
A large portion of my stocks are from my employer, so need to diversify it. I keep postponing this due to the hassle of figuring out CGT etc. but I agree that's something I need to get on with.
We don't have any other option but to pay for childcare, need to check with friends on what they are paying. How much would this typically be?
Again, thanks a lot for taking time to respond and providing some pointers. This is a great forum and have found it very helpful reading through various threads over last few years.


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## Pinoy adventure (4 Feb 2021)

Paying down mortgage would be better than investing in stocks


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## _OkGo_ (5 Feb 2021)

nivakr said:


> Looks like we need to continue doing the same (maximize pensions, and overpay mortgage where we can).


Exactly. 


nivakr said:


> Re. mortgage, still considering whether to go with BOI for 1yr get the 2% cashback with 90% LTV and switch to ulster (possibly get below 80% LTV to get the lower rate) or just go with ulster directly. Taking the cashback (plus mortgage saver) gives about €6k extra (even after the extra interest), which is a nice sum. Seems like a no brainer to take the extra cashback but not sure if I'm missing something.


There are 2 ways to look at this. BOI is 2.9% so with 2% cashback, that is an effective rate of 0.9% for year 1, sounds good. However, one of you will be on unpaid maternity leave so your finances/payslips etc may not look good when you want to switch, especially if the €80k income is on maternity leave, so you could easily end up with BOI for 2 years giving you an effective rate of 1.9%. Still good but maybe not what you were expecting. You are then paying childcare and who knows, maybe baby #2 is on the way so again you end up staying with BOI in year 3 on a fairly high rate

The alternative is to go with UB or KBC for 2.2-2.3% at 80%LTV. They are both offering €1.5k (like 0.5% to you) for professional fees. Over the first 2-3 years you will have an effective interest rate of 2-2.1%. Regular/yearly switching sounds great when it works out but in your shoes I would chase the value of lower interest rates because you are about to enter an expensive period of your life with childcare. You can target reaching a 60% LTV in 3-5 years and then switch to the best value product at that time. However if you do go with BOI, drawdown at 90% to get the full value of your cashback but you can still immediately pay down 10% or more to get to 80% LTV. There should be no break fees involved because rates will not have changed in a short time period



nivakr said:


> I agree re travel systems, just started checking and they are not cheap! On this front, with the baby, we have no idea how much our expenses will increase.


Don't worry, any increase in expenses will be offset by a lack of a social life in the first few months  Don't go crazy on clothing, you will more than likely get a lot of gifts. And you can make the essentials as expensive or reasonable as you want. Staying away from branded products is significantly cheaper so next time you are shopping you can pay attention to the price of nappies! As for childcare, the easiest thing is to ring around to get prices. Typically in the region of €800-1.2k per month depending on where and what you get



nivakr said:


> Its a new build and we are getting the HTB, budgeting 15k for the furniture etc (flooring and all included in the build price)


That sounds reasonable if flooring/kitchens and bathrooms are already included. Just make sure to do another revision of your budget to make sure you haven't missed anything. New builds often include kitchen appliances but will not include washing machines/dryers and things like blinds/curtains can be expensive when fitting a full new build. Even things like a garden shed are easily overlooked. You might not need it straight away but you will more than likely want one at some point


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## presidenttttt (5 Feb 2021)

My position recently was not dissimilar in terms of baby, savings, income, mortgage size. What sort of package has maternity package has your partner/spouse, it may be relevant to your plan to switch mortgages, or at least in terms of keeping the execution simple? It is a good idea, but as alluded to above, don't assume it will happen - anything  unexpected could upset the cart be it job security or illness etc, preventing a further switch. In your case I would do it though, as it sounds like the risk is low and that you understand what you are at. There seems to be increased awareness of the ability to jump mortgage, and i can see lenders putting barriers up in future to slow this down. 

I would also suggest paying down the mortgage to give yourself some breathing space, utilising savings. I think there is no benefit to holding much cash in the bank, I would only want enough cash for my rainy day, baby setup, and initial house costs.  Your net income even with childcare should be sufficient to continue to run up savings again anyway. I would prefer to load up pension over buying shares, but perhaps you are getting the shares as part of a package, or have a more informed reason for accumulating them. Take care with exposure to one company- there are many people who had good reason to feel secure and invincible in 2019, only to see their career trashed by Covid, something unpredictable and outside of ones control.


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## nivakr (7 Feb 2021)

_OkGo_ said:


> Exactly.
> 
> There are 2 ways to look at this. BOI is 2.9% so with 2% cashback, that is an effective rate of 0.9% for year 1, sounds good. However, one of you will



That is a good way to look at things, haven't thought about maternity leave affecting our application later on. Although I won't be on maternity leave (80k income), so maybe not as bad but still something to think. It's just that 2% cashback + 2k from mortgage saver is very attractive to let go! I will work through the numbers, it might not be worth the hassle like you suggest. On your point about are you suggesting to break the contract and switch to UB or pay back extra 10% and stay with BOI?



_OkGo_ said:


> Don't worry, any increase in expenses will be offset by a lack of a social life in the first few months  Don't go crazy on clothing, you will more than



All good suggestions and I was told by friends the same thing about not going crazy with the clothes.



_OkGo_ said:


> That sounds reasonable if flooring/kitchens and bathrooms are already included. Just make sure to do another revision of your budget to make sure


White goods are included thankfully and didn't think of the garden shed tbh. Baby and the move-in to new house might happen around the same time, so I doubt we will have much time/energy to focus on the house too much. So any extras on the house will only happen next year.
Again. thanks for taking time and giving you inputs, evry helpful.


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## nivakr (7 Feb 2021)

presidenttttt said:


> My position recently was not dissimilar in terms of baby, savings, income, mortgage size. What sort of package has maternity package has your


Thanks for your inputs and Congrats on the baby ; hope everything went well!
Her maternity package is quite good; They topup the revenue's maternity benefit and she'll get the full pay for 26 weeks. She will be without pay for 16 weeks (unpaid leave that we plan to take). Not sure how much impact this would have on our mortgage application if we decide to switch. Any idea how I can find this out?



presidenttttt said:


> I would also suggest paying down the mortgage to give yourself some breathing space, utilising savings. I think there is no benefit to holding much



Yes, I will pay down the mortgage with extra cash once we move in to the house and bring the baby home. Most of the shares are from my employer (profit sharing, so very tax efficient and RSUs) but I also bought a few others with the extra savings left over after maximizing our pension contribution tax relief. Any reason to contribute more than that to the pension? And any other better ways to invest those extra savings than buying shares? 
Good point re. over exposure to 1 company, ~60% of my shares are of my employer. Planning to hold them until I draw down the mortgage and sell them off to pay dowm some of it.


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## _OkGo_ (7 Feb 2021)

nivakr said:


> It's just that 2% cashback + 2k from mortgage saver is very attractive to let go! I will work through the numbers, it might not be worth the hassle like you suggest. On your point about are you suggesting to break the contract and switch to UB or pay back extra 10% and stay with BOI?



With the mortgage saver and cashback then yes it does make sense as long as you are ready to switch in 12 months to the next deal. You are probably low risk if the €80k salary is not on leave as you can still show a lot of affordability even on one income temporarily.

I'm suggesting to draw down with BOI and immediately overpay by 10% or whatever you can comfortably afford. There should be no break fee if you do it quickly as the break fees are based on interbank rates which are unlikely to have changed in a short space of time. But to be sure that it is zero, you can request a break fee from BOI for the amount you want to overpay. Then switch to UB or the next best deal in 12 months


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## Black_Knight (9 Feb 2021)

My 2 cents given my experience with buying a house, having a baby, switching mortgage.
Buying the house:
2% + €2k is pretty good, though you'll be paying somewhere around that €2k in solicitors fees. UB covers €1500 of that, BOI doesn't (AFAIK).
I've moved mortgage twice since we bought (4 years ago) - Once with a pregnant wife, and another time with a ~1 year old. Gathering all the documentation is a bit of a pain to be honest, and didn't get any easier after our first was born. I went from a variable rate with Haven, to a 1 year fixed with BoI with 2% cashback, to a 5 year fixed with UB (€1500 paid to my account for expenses + valuation was free).
I was well prepared to just be with BoI for 1 year (I think I exited after 10 months and it cost me €200+ in fees), and switch to a better longer term deal as we added to our family.

WRT maternity leave + mortgage approval, it was not an issue for us. Our savings were good (not as good as yours) and our income was good (not as good as yours) but all we needed was a letter from my wife's office saying she'll return to work on her existing pay.

IMO, if you can smash and grab the 2%, do it. It's the best payout early in your mortgage, and totally worth it once you move to a better mortgage rate as quickly as possible.

Re: Creche/cost of children
It's not that bad. Creche is expensive, but that'll only be when ye are both working, so incomes are back in action then. ~€1000p/m is a decent guide price.
While on maternity leave, you accrue public holidays and vacation days, so 10 months of maternity leave could well be ~25 days of holidays built up which you either get paid for, or can use to bridge between the end of your maternity leave (6 months paid, up to 6 months unpaid) and your return date. Parents leave will be 5 weeks paid come April (currently 2 weeks). It's state paid, but some companies do top this up. It must be used in the first 2 years from the childs birth.
Travel systems, yeah. Pricey. ~€1k isn't abnormal for a nice buggy (we swear by our uppababy vista), and a few hundred for a car seat + base. Those are the main ones. IKEA is great for nursery stuff (cots, chairs, wardrobes, lockers etc.). Get pampers newborn size, then migrate away when they outgrow them a week later - they're far too expensive. We find Tesco Fred & Flo nappies very good. Lidl ones are complete This post will be deleted if not edited to remove bad language.
For clothes, carriers, calpol (significant quantities), toys, some furniture etc. I've regularly spent over 2k a year on these. Probably more like 3k when you take in the unknown expenses my wife does. This certainly doesn't include creche. 

Furnishing the home:
Take your time. Get to know the rooms in the house and how you'd like them. We started with 1 bed, 3 mattresses (2 would of done), and 2 chairs. We bought our dining table and couches soon after moving in, and have just added over time


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## NoRegretsCoyote (9 Feb 2021)

nivakr said:


> 1. My plan is to maximize pension contributions to avail of the full tax relief and then overpay mortage repayments with any remaining savings. Is that the right course of action or am I better off investing in stocks without overpaying mortgage.



I would say this is right for now. Bear in mind that you might want the financial flexibility for one of you to go part time in the coming years (also see below). 



nivakr said:


> 2. Are there any better ways to save for the baby's future (expenses, education etc. )



It's not purely financial. Is your or your spouse's career consistent with having a young family? Think about working hours, commute, ability to go part time, etc. At one point we had two kids under two and two full-time jobs and something had to give. It wouldn't have worked (for us anyway) on salaries of a million each.


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## nivakr (10 Feb 2021)

Thanks OkGo, that's clear I think. draw down the BOI mortgage, get cashback, pay back extra and then switch to UB ideally after 12 months.



Black_Knight said:


> My 2 cents given my experience with buying a house, having a baby, switching mortgage.


Thanks for  sharing your experience, it looks like I'll be going ahead with BOI, get cash back and switch to UB



Black_Knight said:


> While on maternity leave, you accrue public holidays and vacation days, so 10 months of maternity leave could well be ~25 days of holidays built up which you either get paid for, or can use to bridge between the end of your maternity leave (6 months paid, up to 6 months unpaid) and your return date. Parents leave will be 5 weeks paid come April (currently 2 weeks). It's state paid, but some companies do top this up. It must be used in the first 2 years from the childs birth.


Yes, I think holidays would cover 2 of the 6 month unpaid leave. I know there is a 2 week leave I can get but wasn't aware that it's increased which is nice. But I don't think my employer would top it up for the extra 3 weeks, I think they do for the usual 2 weeks, need to check though.



Black_Knight said:


> For clothes, carriers, calpol (significant quantities), toys, some furniture etc. I've regularly spent over 2k a year on these. Probably more like 3k when you take in the unknown expenses my wife does. This certainly doesn't include creche.


I can imagine that, there probably is no limit to these small expenses and they add up!



Black_Knight said:


> Furnishing the home:
> Take your time. Get to know the rooms in the house and how you'd like them. We started with 1 bed, 3 mattresses (2 would of done), and 2 chairs. We bought our dining table and couches soon after moving in, and have just added over time


Yes, that's the plan...to slowly furnish the home. Get the basics sorted first and it looks like both moving in and baby will happen around the same time; so we will not have much time for initial 3-4 months atleast.



NoRegretsCoyote said:


> It's not purely financial. Is your or your spouse's career consistent with having a young family? Think about working hours, commute, ability to go part time, etc. At one point we had two kids under two and two full-time jobs and something had to give. It wouldn't have worked (for us anyway) on salaries of a million each.



Good point and I agree. Our plan is to see how it goes and maybe spouse to reduce hours if it doesn't work out. One thing's becoming clear though, time must be managed a lot more carefully!


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## Black_Knight (10 Feb 2021)

nivakr said:


> Yes, I think holidays would cover 2 of the 6 month unpaid leave. I know there is a 2 week leave I can get but wasn't aware that it's increased which is nice. But I don't think my employer would top it up for the extra 3 weeks, I think they do for the usual 2 weeks, need to check though.
> !


As far as I know, both parents are entitled to parents leave. 5 weeks each


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## nivakr (12 Feb 2021)

Hi Black_Knight, I didn't know this. I looked up the various available leaves related to having a child. Let me know if I missed something or if there are some corrections.

Maternity Leave for mother (26 weeks paid + 16 weeks unpaid) + annual leave, holidays etc. 
Paternity Leave for father: 2 weeks in the first 6 months of baby's birth.  Will get paternity benefit, need to check if my employer tops it up.
Parents Leave: 5 weeks each for both parents, need to take within the first year of baby's birth. Will get the parents benfit but need to check if our employers top this up (not likely)
I was aware fo the first two but not the last one. Thanks for pointing it out My wife is going to talk with her HR end of this month to see her options and in what order she needs to take these. 



_OkGo_ said:


> Sell off any stock you have in your own company. It is generally a good idea not to have all your eggs in one basket (income and shares)


Following up on the suggestions to sell off my employer stock. I found that, out of the total 80k in stocks ~60% or 50k is fom my employer's stock. On one hand, I agree it's good practice to diversify, I'm not totally sure what to do with that money after I sell. I don't see a clear alternative investment other than picking stocks individually, which probably isn't any less risky. The advice on the internet seems to be to put that money in an ETF that tracks the world index. However, my understanding is that they are not favourably taxed in Ireland: taxed at 41% with a 8yr deemed disposal and comes with a lot of paper work, so that put me off. So, is paying down the mortgage the only option or is there an alternative?


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## Coldwarrior (12 Feb 2021)

nivakr said:


> So, is paying down the mortgage the only option or is there an alternative?


You have an 90% LTV on your mortgage, so I'd pay this down as much as possible rather than investing outside your pension.


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## _OkGo_ (12 Feb 2021)

nivakr said:


> Maternity Leave for mother (26 weeks paid + 16 weeks unpaid) + annual leave, holidays etc.
> Paternity Leave for father: 2 weeks in the first 6 months of baby's birth. Will get paternity benefit, need to check if my employer tops it up.
> Parents Leave: 5 weeks each for both parents, need to take within the first year of baby's birth. Will get the parents benfit but need to check if our employers top this up (not likely)


There is also parental leave:
_"Parental leave entitles parents to take *unpaid leave* from work to spend time looking after their children. You can take up to 26 weeks’ parental leave for each eligible child before their 12th birthday. "_



nivakr said:


> So, is paying down the mortgage the only option or is there an alternative?


There are other options as you have outlined but non that are a guaranteed return the way paying down your mortgage will be. You are about to drawdown a mortgage at 2.9%. With tax and costs, an ETF would need to give you a pretax return of 5.8% just to match the guaranteed return of your mortgage. How much better than 5.8% do you expect it to perform to give you a better return than your mortgage? You are taking a lot of risk for what what might give a marginally better return. IMO, getting your LTV down to 50-60% should be your priority to get the best rates and reduce your debt.


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## Black_Knight (13 Feb 2021)

nivakr said:


> Hi Black_Knight, I didn't know this. I looked up the various available leaves related to having a child. Let me know if I missed something or if there are some corrections.
> 
> Maternity Leave for mother (26 weeks paid + 16 weeks unpaid) + annual leave, holidays etc.
> Paternity Leave for father: 2 weeks in the first 6 months of baby's birth.  Will get paternity benefit, need to check if my employer tops it up.
> ...



Correct. If your company tops up maternity leave they'd be wise to top up paternity leave to the same level. Awkward pr if they're different.

Parents leave is currently 2 weeks to be used by the child's first birthday, but an additional 3 weeks (total of 5) is to be signed into legislation in April I believe. This will be usable up to the child's 2nd birthday. 

Paternity leave, as mentioned, is the 4th option. Unpaid leave for 26 weeks per child until age 12. You accrew vacation days and public holidays in this time, so it can be a handy one to use a day a week if you or your wife want a shorter work week.


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