An Investment Savings Plan to meet your future needs
Many of you will have heard me talking about the 3 Savings Pots you need to have.
Saving for a future financial commitment such as 2nd or 3rd level education fees makes perfect financial planning sense. For the purposes of this article I’m going to focus on Pot 2 – The Medium Term Savings Plan.
A recent survey carried out by Zurich Life estimated that the average cost of sending your child to college is €6,178 per year.
And if the students are studying and living in rented accommodation the annual cost goes up to €12,109.
Eye watering figures when you look at them!
The solution to all financial challenges is to plan ahead and save regularly.
Saving money on deposit is fine for the short term. But with deposit rates at close to 0% p.a. and inflation currently around 5% p.a. the real value of your savings is being eroded.
However, if you commit your savings to an investment plan, you can benefit from steady, consistent growth over the medium to long term.
You can select a plan that is suited to your attitude to risk and your ability to ride out the short term periods when investment markets are rocky.
Using the example of a family saving to fund their two children (currently aged 10 & 12) going to college, the following savings would be required.
The investment saving plan can also be boosted by adding a lump sum at the start to reduce the monthly commitment or reduce the amount of years you need to invest for.
The key to having a successful investment savings plan is to;
Know how much your savings goal is
Select an investment profile that you are comfortable contributing to
Stick to the plan
For more information on how to start your investment savings plan it is important to seek impartial and professional advice that is tailored specifically to your needs and experience. Just get in touch if you’d like to have a chat about your savings pots.
Please note source of all figures and charts above is Zurich Cost of Education in Ireland survey 2021. The figures quoted are based on the following assumptions;
Your dependant starts college when they are 19 years old.
Each dependant spends 4 years in college.
All dependants are assumed to have the same living arrangements while in college.
Student Accommodation is accommodation provided by the college whereas Rented Accommodation is privately rented accommodation.
We have allowed for inflation for all of the College Costs in the table above of 1% per annum from now until the first year that college starts.
No single contribution has been included in the estimated figures above.
The regular contribution per dependant ceases once that dependant starts college. The savings term for each dependant will vary.
We have allowed for an annual management charge of 1.25%, a regular contribution allocation rate of 101% and no surrender penalties, all of which may change. These assumptions are based on a standard charging structure.
A government insurance levy (currently 1%) applies to this policy. The contributions above are inclusive of this levy.
Your monthly contributions are assumed to increase by 1.5% each year from now until your dependant starts college.
For savings terms of 5 years or less we have assumed a gross investment return of 4.30% per annum on your savings. For savings terms greater than 5 years, we have assumed a gross investment return of 4.40% per annum on your savings. This is not a forecast because the value of your investment may grow at a faster or slower rate than assumed and the value of your investment may be expected to fall from time to time as well as rise.
We have assumed that on death, encashment, partial encashment or assignment of the policy or on each 8th policy anniversary, tax is deducted on the gains made at the current rate of taxation, being 41%.
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I am delighted to have chosen Coleman Financial Planning to advise me on protecting my family and planning for my retirement. The advice I received was presented in a very clear and concise manner and I was confident I was getting the best deal in the market. I would recommend anyone to contact them if you are looking to get real independent advice
Karl JenningsCommercial Finance Director10th January 2017