Savings and Investments

The words savings and investments are usually mentioned in the same context but there are significant differences in their application.

Savings:

• Putting your money away safely in a bank, building society or credit union
• You can decide for how long you want to save and if you want to have access to your money from time to time?
• These savings are usually short term because they are repayable on demand
• You will receive interest on your savings, albeit at a low rate, however the rate increases if you are prepared to commit your money for a specific term
• Your money is secure at all times

NOTE: All savings are subject to (deposit interest rate tax) DIRT currently set at 20% of any interest you earn, and this tax is deducted at source. The exceptions are some An Post and credit unions accounts.

Investments:

• Giving your money to a bank, building society, investment broker, or stockbroker
• They will offer to invest your money in a range of investment funds, or stocks and shares
• You will have to commit your money for a fixed period of time, 2, 5, 7 and even 10 years or longer.
• Your money will be at risk and it is vital that you clearly understand the elements of risk that apply to the investment product you are considering.
• You can receive much greater returns than your savings would have given you, however your risk profile increases pro rata

NOTE: When you sell shares, any profit is subject to capital gains tax. Tracker bonds and unit linked plans are subject to exit tax, presently 23%.

Before you save or invest:

• You must assess your ability to save or invest now and into the future
• Consider paying off some of your existing high cost loans and credit cards before you save at a much lower interest rate level
• Have it clear in your mind ‘why do I want to save or invest’? Am I happy to just draw an income from the investment, or would I like to achieve some capital growth?
• What risks are you willing to take with your money?
• As the range of investment options is enormous and changing all the time, you must first talk to a professional independent investment broker and clearly understand the many issues that need to be considered.

SSIA Matured?

Now that you have established the savings habit, and proven to yourself it is a painless exercise, why not continue the good habit? Here are some of the options worth considering:

1. Pay a lump sum off your mortgage, or your credit card, or your personal/car loan. Ascertain which is your most expensive borrowing, and take steps to reduce it or pay it off altogether.
2. Continue the savings habit by putting your monthly contribution as an extra payment on your mortgage, thereby dramatically reducing the remaining term of the mortgage. You will be amazed at the potential saving.
3. Set up the payment as a monthly contribution to a PRSA product, and let the Government contribute to your pension, by virtue of the tax relief on pension contributions.

For further information, please contact Pat Nestor by phone at 01-2910800 or by Email at to discuss your options.

Free independent information from the Irish Financial Services Regulatory Authority (IFSRA):

• "Savings and investments made easy"
  (IFSRA consumer guide; PDF format)