Did you know……
It is estimated that it costs €584 a year to send a child to primary school, €1,236 a year for secondary school & if you levy third level education costs ranging between €20,000-€40,000 per child on average this is a significant amount of money!
If you have a lot of children, you may have to fund some of the third level education costs by working or going into debt.
This can be avoided if you start a savings account sooner rather than later.
As the economy continues to grow and inflationary pressures increase, the Irish central bank has been raising interest rates in recent months. This has significant implications for individuals looking to get a mortgage or who already have a mortgage, as it means that their monthly payments are likely to increase. For those with a variable-rate mortgage, the impact of rising interest rates can be particularly severe, as their monthly payments can fluctuate based on changes in the interest rate. It’s important for individuals to understand the impact of rising interest rates and take steps to prepare for the increased costs.
In the blog we are going to look at different ways individuals can cope with rising interest rates.
One of the key things that individuals should do when facing rising interest rates on their mortgages is to talk to a financial advisor like Alpha Wealth. We can help you understand your options and develop a plan to cope with the increased costs.
Another strategy is to consider a mortgage with a fixed interest rate, rather than one with a variable rate that can change over time. This can provide more certainty and stability for individuals, as they will know exactly what their monthly payments will be for the life of the loan. We can help you compare different mortgage options and choose the one that’s right for you and put you in contact with a Mortgage Broker that we trust.
You can make extra payments on your mortgage, either on a regular basis or whenever you have extra money available. This can help reduce the overall amount of interest they pay on their mortgage and pay off their debt faster.
Individuals can also try to reduce their other expenses, such as by cutting back on discretionary spending or finding ways to save money on their monthly bills. This can free up more money to put toward their mortgage payments and help them cope with the rising interest rates.
One thing to consider when investing is the interest on any debt that you may have. As the interest on your debt increases, it can eat into the money that you are able to put into your investments. However, there are ways to offset this. One way is to ensure that any interest that your savings are earning is at least enough to cover the interest on your debt. This way, the net effect of the interest on your debt is reduced. Unfortunately, many banks are currently offering very low interest rates on savings accounts, so it may be difficult to earn enough interest to offset the interest on your debt. It’s important to carefully consider your options and make a plan that works for you. Check out our savings club here.
Ultimately, the key to coping with rising interest rates on a mortgage is to take action and make a plan. Alpha Wealth can provide the expertise and support that you need to navigate this difficult situation and find solutions that work for you. It’s important to remember that you don’t have to face the challenges of rising interest rates on your own. Let us help you with expert guidance and support navigate this difficult situation and find solutions that work for you.
Please note that we are teaming up with the Mortgage Architects to do a webinar on this topic on Friday, January 27th. You can register for this webinar below. Furthermore, if you have any questions or queries, please do not hesitate to contact us.
Bill Gates is one of the world’s richest people, earning about €328 per second.
By the time you read this article, he will have earned about €200,000.
We know how he made his money, as Microsoft is a huge corporation.
You might be thinking that Mr Gates can afford to be wasteful with his money and dry himself with €50 notes, but the opposite is true. He actually gives away almost all of his income to charity. He has donated €30bn since 1994. Nonetheless, he remains one of the richest people in the world because he, or more precisely his money manager Michael Larson, manages the wealth extremely well.
We ordinary mortals can follow a few of his strategies.
The first is is to live within one’s means.
Mr Gates owns three Porsches, one of which is worth €200,000, but this represents less than 0.001% of his wealth. The lesson here is to be mindful of going into excessive, unmanageable debt for a depreciating asset. I am not anti-debt but I would be mindful of offers such as PCP car finance deals that sound too good to be true. They can cause problems down the line. It took Mr Gates seven years and €54m to build his 66,000 sq ft mansion. He didn’t have to borrow to finance the project but if he had, I am sure he would have shopped around. If I were managing his finances, I would have recommended he fix his mortgage for the next five to 10 years with the strong probability that interest rates would rise over the following 60 months. Personally, I think fixing for five to 10 years makes a lot of sense for first-time buyers. Of course, the debt to avoid at all costs is credit cards. Mr Gates once said: “If I borrowed money at 18% or 20%, I’d be broke.” Paying over 22% on say a balance of €2,000 on a credit card will cost €37 a month in service costs alone, according to Zurich Life. Another lesson we can learn from Mr Gates is to avoid having all your eggs in one basket.
Diversification is extremely important.
His investment portfolio has grown by about 11% a year since 1975. It includes a private island, a private commercial plane, and a lot of antiquities. For average folks the message is still the same: Split your savings and investments into different asset classes that can stand up to various financial storms. Irish people were and still are obsessed with property ownership despite the boom-bust cycle. Ironically, Mr Gates would have the same wealth if he had kept it all in the Microsoft shares he owned at the start of the company over 40 years ago. But it would be a sleepless daredevil to have carried that much wealth in one company. Some of his investments have been duds and some have been resounding successes. The one very important message is he has taken a longterm view, following his close friend Warren Buffett’s views of longterm investing: “Only buy something you would be perfectly happy to hold if the market shut down for 10 years”.
The point here is that investing and saving is not for the short term.
Those that expect quick gains are likely to be very disappointed. If you saved €150 a month for the last five years, you would have grown your savings to €10,333. If you started to save €300 a month 10 years ago, your savings would have grown to €47,440. Mr Gates plans to give most of his money to charity when he dies. He is not leaving a great deal to his children because of the taxes they would have to pay. Making donations to qualifying charities reduces his inheritance tax. There are ways of reducing the tax bill facing your children. One is to “gift” your children up to €3,000 each year, per child, which falls outside of the gift or inheritance tax net. This is called the small gift exception and is a handy way of passing money (though not necessarily directly at the time) to children. Given that you can gift this money every year and it can be given by each parent, this can add up to a lot of money that will fall outside of the tax net.
Teaching your children about finances is an important part of parenting. But how can you make sure they develop good financial habits? In this blog post, we’ll explore some practical tips to help your children become financially savvy and set them up for a successful future.
Financial planning is crucial, especially when talking about our children’s future, writes Nick Charalambous, Managing Director of Alpha Wealth.
Many parents avoid discussing money with their children as they feel they are either too young or immature to understand it.
Parents have a responsibility to educate their children on how to be financially savvy and how to save and spend wisely.
Having spent my first 23 years in London, my financial education may have differed from those in Ireland. In the UK, there are government incentives that assist children when they might require funds.
One is a tax-efficient savings plan, called a Junior ISA, and another is a pension for newborns, in which a relative — typically a parent or grandparent — can pay into a pension for a child from birth.
Here in Ireland, many remember the Irish government’s SSIA scheme, a five-year savings plan with a 25% top-up contribution from the Government. This scheme operated around 2001/2 to 2006/7 and was money for jam.
It is estimated that it costs €584 a year to send a child to primary school, and €1,236 a year for secondary school. Third-level education costs range between €20,000 and €40,000 per child on average.
For a lot of children, they have to fund some of the third-level education costs by working or going into debt. As a financial advisor, I talk to clients daily about financial planning for the future and following a roadmap to what they want to achieve.
Part of this is with regards to their children, whether it be helping them to get onto the property ladder or succession planning.
My son is 13 and it has given me useful insight into the mind of a teenager talking to him about the importance of money, even in situations such as buying items for the game craze Fortnite.
The way I can get him to understand the importance of saving is for something he is really interested in. My son just opened his first student savings account and received a bank card, and whilst potentially dangerous in the hands of a teenager, it has given him more education than my 20-plus years of experience could in months of discussions.
On the other extreme, trying to not make the mistakes a lot of us made during the Celtic Tiger days cannot be stressed enough. As an experiment, I put €50 into one of the online bookmakers for betting on the World Cup.
Given my son’s interest in soccer and his ability in maths, he assisted me in betting on some of the matches. As the tournament progressed and our bets became more adventurous, we lost all the money, including gains made.
The feeling of the loss we suffered far outweighed the pleasure of the gains. Thankfully, he now has an aversion to betting. I am not advocating this strategy — it was a one-off controlled experiment for a lad that kept probing me about betting, typically only hearing from relatives when they won but not when they lost.
Helping our children be more financially savvy and encouraging them to save, even without these tax incentives, is the most important financial lesson I think we can give them.
Warren Buffett’s famously said to “only buy something that you’d be perfectly happy to hold if the market shut down for 10 years”.
That gives in insight into the lesson of saving and investing over a long period.
Teaching our children to start young and save regularly is far more important than a haphazard short-term mentality.
Trying to get someone to do something by telling them generally isn’t a long-term sustainable solution.
Showing them what it can do for them is generally a much more powerful strategy. A picture paints a thousand words.
