How best to make the most of savings over the long term

[kevp]

I had managed to save a decent amount over several years but had a severe accident which means I may be unable to work for life.
I have 35000 now in an account that's not doing much, and I'm finding that I'm eating in to my savings very fast just for living and bills.

I know that its my own decision what to do with my savings but I like to have lots of information before making these kind of decisions.
I have read a lot on this site but am almost more unsure now than before, its a difficult economic time to decide what to do to secure savings and make the most of them.
I will most likely never have money like this again and its going down quick so I need to try and make it last as long as possible as I'm still quite young and the next few decades are not going to be easy.

I'm not really able for too much hassle, so don't think I'd go with things like opening foreign accounts, I hope I wouldn't regret that, I wouldn't mind locking away some for a higher rate but from reading on here it seems most recommend keeping instant access due to the current economic situation.

I had though about moving about 25 to maybe a rabo or kbc savings account and keeping around 6 in a instant access local account at 2-3% and the rest in a current account to keep it charge free and then move some in to it from the other accounts as I need it.
But I don't know if this would be the best thing to do so I'm open to any advice on how to make this money work as hard as possible while keeping it quite safe, I'd even consider slight risk with some of it, if it could help me long term.

I assume that 35000 can only be worked so hard and its never going to make that much but I really need to stretch it hard.

Thanks for any input

 

[Lightning]

I had managed to save a decent amount over several years but had a severe accident which means I may be unable to work for life.
I have 35000 now in an account that's not doing much, and I'm finding that I'm eating in to my savings very fast just for living and bills.

Ok. Are there bigger issues here? Do you need to analyse your income and outgoings and budget before looking at deposit strategies?

If you want to preserve the 35,000 EUR (?) then I think you firstly need to figure out how you are going to be able to balance your books.

 

[kevp]

Ok. Are there bigger issues here? Do you need to analyse your income and outgoings and budget before looking at deposit strategies?

If you want to preserve the 35,000 EUR (?) then I think you firstly need to figure out how you are going to be able to balance your books.

Thanks CiaranT for replying.

I have managed to get somewhat of a handle on my usual day to day outgoings but can't avoid going to my savings for extras like some for rent, insurance etc. and then other irregular bills like medically related stuff and other things.
My only income now is social welfare and then my savings to fall back to, this isn't going to change for a long time.

It'd be great to be able to keep it but I can't see being able to maintain the 35 over a very long term period so I suppose I want to at least leave it that if I'm using 2-4000 of it a year, that at least a good part of the outgoings are being replaced with interest or something.
It'd also be great to be able to build on it but I can't imagine that being remotely possible unless my life changes for the better in a few years.

 

[Lightning]

Ok. One option might be the below:

Keeping 3,000 EUR in an instant access account.
Keeping 32,000 EUR in a 1 year term deposit product, like Nationwide UK, that gives you monthly deposit income into your current account? This might help prevent you eating into your savings and give you some (small) additional monthly income.

 

[Gervan]

€32,000 at 3.6% in Nationwide UK monthly savings is €1152 interest for the year, so €96 per month before DIRT or €67 after tax (if OP cannot get an exemption). I get the feeling the OP wants more than this for living expenses.
As he says, €35,000 can only be "worked so hard". €35,000 at 4% is still only €1400 annual (before DIRT).

I think you should try to draw up a budget, so you will see by how much your projected spending will exceed your SW income. Then you can put the balance away into a term deposit, so you won't be tempted to fritter it away, but it does look as though you will be spending it down over the next few years.

 

[Lightning]

Totally agreed that a budget is needed here, as indicated above. Also, totally agreed that the NUK option is not going to cover living expenses. It might mearly slightly help to get a monthly payment.

 

[kevp]

Thank you both for replying.

Ok. One option might be the below:

Keeping 3,000 EUR in an instant access account.
Keeping 32,000 EUR in a 1 year term deposit product, like Nationwide UK, that gives you monthly deposit income into your current account? This might help prevent you eating into your savings and give you some (small) additional monthly income.

That's one I'll look into, I hadn't though to consider NUK.

€32,000 at 3.6% in Nationwide UK monthly savings is €1152 interest for the year, so €96 per month before DIRT or €67 after tax (if OP cannot get an exemption). I get the feeling the OP wants more than this for living expenses.
As he says, €35,000 can only be "worked so hard". €35,000 at 4% is still only €1400 annual (before DIRT).

I think you should try to draw up a budget, so you will see by how much your projected spending will exceed your SW income. Then you can put the balance away into a term deposit, so you won't be tempted to fritter it away, but it does look as though you will be spending it down over the next few years.

I have done a budget before and have a good idea of my usual outgoings, on average for the year, I reckon I'd use 1600-2000 from my savings for helping with my usual expenses such as rent and about 1000-2000 for other bills that I'm certain of.

I usually have other outgoings that I just can't budget or plan for, take the last 3 years, I managed to keep my full outgoings from savings at less than 2000 one year but it hit 3800 another and 5000 another, these aren't decisions I can make on whether I want to buy something or not, they tend to be health related things that can crop up at short notice.
Yes I can't see a way around it going down over the coming years, I'm okay with that but I want to try to stretch the number of years out and make it work as hard as I can.

I've read a lot here saying that its not a safe time to use term deposits, I would be okay using them if I thought it'd be a safe time, I'd be happy to lock 25000 away for a year or two, or even 20 for 4-5yrs, I'd probably still select something that I could break, in an unforeseen emergency even it was penalised, I have seen quite a few products that allow this but will penalise.



Would it be madness to think about investing a few thousand on the chance of a higher return? I know the problem is the large chance of losing some or all but would the potential return from a few safe enough funds make the chance worthwhile?

 

[wbbs]

Bank shares were once considered safe enough funds!

 

[kevp]

Bank shares were once considered safe enough funds!

Very true, I suppose I mean if I invested 3-5000 over a long period, understanding the potential loss and choose long term low risk options, would it be a worthwhile chance over keeping it on deposit.

 

[The Ghoul]

It sounds to me as though 35k just isn't going to be enough for what you want given your circumstances.

Instead of putting it in a deposit account etc. could you invest a chunk of it in yourself to try to overcome the problems caused by your accident and allow you to get back working. I have no clue how good or bad you are after your accident but could you retrain, work from home, invest in equipment that would allow you to work etc. Obviously this would need a lot of thought and maybe you have considered all of this already.

 

[rekhib]

That's a very difficult situation kevp. As has been mentioned, the 35k, even at 5% would only net 1750 in interest and even a really high risk strategy aiming for 10% would only leave you an additional 3500 per year, before any taxes. I think your priority has to be preserving the 35k, obviously any income potential from it, decreases in line with the lump sum.

I'm sure all of the following have probably occured to you and / or are not possible but it may provide some food for thought:

- Are you definitely getting all applicable social welfare allowances, e.g. disability allowance, mobility allowance, blind pension, rent allowance &c, perhaps you could arrange a meeting with the Dept. of Social Protection to discuss your entitlements.

- You mention that some of your larger extraneous outgoings are health-related, and from your post, it looks like you're not a home owner. Would you be entitled to a medical card? Also, if the expenses are equipment related, perhaps a national organisation / charity which focuses on the nature of your disability would be able to offer assistance.

- You could maybe supplement your income by working from home, i.e. there are data entry companies who post out collections of documents to your home and you type them up / enter them into a database. Depending on what line of work you were involved in, perhaps there's an 'at home spin' on it. For example, if you were in sales or marketing, there are lots of opportunities to re-train (online) and work as a social media marketer for a few hours each week. Even, if you were able to earn a couple of thousand Euro per year, it would help stretch out the 35k.

- With regard to the 35k. In terms of splitting it, it's not worthwhile to split it in order to seek a higher return, you should only split it to remain liquid in the event of unforeseen expenses. If you put 30k into a 'low risk' savings account, earning say 3% and the other 5k into a higher risk / longer term, saving / investment product at, say 5%, you would only be looking at an additional 100 Euro per year. If you are putting it on deposit, you could try one of those 'interest first' accounts where the interest is paid up front, that would allow you to use the interest for the coming year, as opposed to decreasing the amount you put on deposit and having to wait a year for the interest to be applied. I'm sure CiaranT could recommend a suitable account.

 

[kevp]

Thanks for replying

It sounds to me as though 35k just isn't going to be enough for what you want given your circumstances.

Instead of putting it in a deposit account etc. could you invest a chunk of it in yourself to try to overcome the problems caused by your accident and allow you to get back working. I have no clue how good or bad you are after your accident but could you retrain, work from home, invest in equipment that would allow you to work etc. Obviously this would need a lot of thought and maybe you have considered all of this already.

I have already spent a very large amount on getting myself to this point, and this is still unfortunatly nowhere near capable of work, I hope things will improve further but I can't say whether they will or not or put any time scale on this.
At the moment I could spend about 10-20k on making things more comfortable for me but this would just be for comfort and ease of living, it wouldn't help me health wise or put me closer to being able to work.

That's a very difficult situation kevp. As has been mentioned, the 35k, even at 5% would only net 1750 in interest and even a really high risk strategy aiming for 10% would only leave you an additional 3500 per year, before any taxes. I think your priority has to be preserving the 35k, obviously any income potential from it, decreases in line with the lump sum.

I'm sure all of the following have probably occured to you and / or are not possible but it may provide some food for thought:

- Are you definitely getting all applicable social welfare allowances, e.g. disability allowance, mobility allowance, blind pension, rent allowance &c, perhaps you could arrange a meeting with the Dept. of Social Protection to discuss your entitlements.

- You mention that some of your larger extraneous outgoings are health-related, and from your post, it looks like you're not a home owner. Would you be entitled to a medical card? Also, if the expenses are equipment related, perhaps a national organisation / charity which focuses on the nature of your disability would be able to offer assistance.

- You could maybe supplement your income by working from home, i.e. there are data entry companies who post out collections of documents to your home and you type them up / enter them into a database. Depending on what line of work you were involved in, perhaps there's an 'at home spin' on it. For example, if you were in sales or marketing, there are lots of opportunities to re-train (online) and work as a social media marketer for a few hours each week. Even, if you were able to earn a couple of thousand Euro per year, it would help stretch out the 35k.

- With regard to the 35k. In terms of splitting it, it's not worthwhile to split it in order to seek a higher return, you should only split it to remain liquid in the event of unforeseen expenses. If you put 30k into a 'low risk' savings account, earning say 3% and the other 5k into a higher risk / longer term, saving / investment product at, say 5%, you would only be looking at an additional 100 Euro per year. If you are putting it on deposit, you could try one of those 'interest first' accounts where the interest is paid up front, that would allow you to use the interest for the coming year, as opposed to decreasing the amount you put on deposit and having to wait a year for the interest to be applied. I'm sure CiaranT could recommend a suitable account.

I think I have looked into most of what you describe,

I do have a medical card, luckily enough, but although I'd be lost with out it, there are a lot of expenses that just aren't covered by it, I have got some help before with expenses for equipment and such but there are just not too many organisations that can or will help in financial ways, most offer support roles and similar kinds of help but very few offer actual finance.
I could start a whole new thread on this topic but I better not

On social welfare, I am in the process of looking for a little more help from them but it will be very minor and won't make too much of a difference, the big one for me would be rent supplement but I can't get that because I have these savings.
At most I'll be entitled to a few euro extra a week, which will be a help but won't make that big of a difference.

Supplementing my income with some work is unfortunately impossible at the moment and for the foreseeable future.
I hope that will change but I can't depend on that.

I see what you mean by splitting it, probably just not worth it.
I really can't see being able to save the full 35k longterm, but things should hopefully settle out in a few years, I guess for now the best I can hope for is that if I'm withdrawing 2or3 a year, that I'm at least getting 1or2 in interest to at least slow down the decline.
I guess the interest of 35k is never going to be great, I often think if I had double it or even 100k the interest would be a reasonable amount and could make things a lot more comfortable but then I remember that I'd then lose most of the SW so be far worse off so

As yourself and CiaranT say an interest upfront or monthly account might be the best bet for now.

On this topic, is now considered a safe enough time to bank with any Irish banks for accounts such as term deposits, or should I go with a bank like NUK, Investec or Rabo which have another countries backing too, or I wonder would I be better take the slightly lower rate and keep instant access for now and wait to see if things settle down a bit in the economy?

Seems to be a lot of fear now with people and they're savings.