Planning for my family's future - any advice?

Age: 42
Spouse’s/Partner's age: 43
Number and age of children: 3 children under age of 5

Income and expenditure
Annual gross income from employment or profession: €110k
Annual gross income of spouse: €0 (children’s allowance only €420 p/m)
Monthly take-home pay: ~€5400
Type of employment: e.g. Civil Servant, self-employed: Civil Servant

In general are you spending or saving: we save most months in region of €500-€1000, on the other months we spend the total income for that month

Summary of Assets and Liabilities
Family home worth ~€800k with a €300k mortgage
Cash of €70k

Family home mortgage information
Lender: BOI
Interest rate: 2.8% fixed for 2 years with 10% overpayment


Other borrowings – car loans/personal loans etc – no loans
Do you pay off your full credit card balance each month? Yes

Other savings and investments:
Do you have a pension scheme? Yes, I have a private pension fund €130k with an option now to transfer to public sector pension or leave as is or transfer to a pension bond and I have a public sector pension now also. No AVCs setup yet, considering starting an AVC of €200 p/m. Wife had a public sector pension with about 10 years of contributions before she took a career break to be a stay at home parent.

Do you own any investment or other property? No

Other information which might be relevant
Life insurance: We have mortgage protection which provides a lump sum on death. I have a death in service benefit and also income protection. We have no cover for my wife is she falls ill while on career break so we probably need to consider life assurance for her for death / illness?

Kids’ education – We may need to pay private secondary fees for our 3 kids… could be in region of €5k p/y so for 3 kids that could be €90k just to get to leaving cert. Our preferences are schools that are non-fee paying, however we won’t know if they will secure a place so we are planning on basis of having funds just in case. On top of that we assume all 3 will go to college also.

What specific question do you have or what issues are of concern to you?

So we made the decision a few years ago that my wife would take a career break while kids are small and she would return to part-time work when the youngest goes to primary school. There is a lot of pressure when it’s a single income with 3 small kids, we generally live within our means and always look for deals on utility bills, shopping etc. I do worry about the future (alot) and if we are doing the right things now to set ourselves up financially, two specific areas of concern are below...

Pensions – I am planning on staying in public sector until retirement and so I am looking at how I maximise my retirement situation… I will have about 25 years’ service so will be on a reduced pension. I am thinking of starting AVCs each month maybe €200 p/m depending on what we can afford at the moment. For my private pension, I am considering a bond that could release around the time my children go to college to pay for fees etc. For my wife, we are thinking of maxing out her AVCs when she returns to work which will probably be on a part time basis. Any advice on this approach – is it the best or should we be considering something else or different?

Savings – What would be a wise thing to do here with our €70k savings?

• Keep a rainy day fund – maybe €30k?
• Pay of some of mortgage in a lump sum when fixed rate is up?
• Put more in my pension?
• Invest in some other mechanism – we don’t have any investments so we are complete newbies all advice welcome
• As family grows we may need more space and so we may look to move house in next 5-10 years – should we keep money aside for the 20% deposit so to avoid the “selling chain” (selling our own house first before buy) or is that just pure madness given Dublin prices would require a lot of cash for 20% deposit?!

Any other areas we should focus on? Thanks for your time.

You have a mortgage of 3 times your income.
You are paying 2.8% on it.
While you have €70k earning 0%.

Pay the €70k off your mortgage. You do not need a huge rainyday fund unless you have some specific expenditure planned e.g. changing your car. If you have your mortgage greatly reduced by the time your first kid starts secondary school you will have much smaller mortgage repayments. (Do check the break fee, but it usually makes sense to pay current account money off a fixed rate mortgage even with the break fee.)

DubMark said:

As family grows we may need more space and so we may look to move house in next 5-10 years

Click to expand...

If you were planning to trade up in the next two years, there might be some sense in keeping cash. But as it's so far away, there is no point in effectively borrowing the deposit 7 years in advance. And, as you say, you will probably have to sell to trade up.

The pension or mortgage question is a bit more difficult. Given that you need flexibility and will have a public service pension anyway, I think you should go for the flexibility and pay down the mortgage first. This will make it easier to trade up when the time comes. And if you don't trade up, you will have plenty of cash to pay College fees or contribute to a pension then.