Sunday times - Question of Money - August 14

Posted by Jill Kerby on August 31 2011 @ 09:00

Forget saving for your child and pay your debts instead


ST writes from Dublin: I have recently started saving the child benefit of €140 per month to use for the education of my daughter who is one year old. Could you please advise on the best accounts for regular saving over the long-term. I currently put it in her credit union account, but am sure that we could be getting a better interest rate elsewhere. 

You don’t say how much of a dividend your credit union is paying but chances are it isn’t as much as the fixed deposit rates on offer from many high street banks or An Post.  We post the best rates on the market in our weekly ‘Best Buys’ column.

However, I think you need to consider more than just the best yield. Deposits are subject to 27% DIRT tax, which is likely to rise, and price inflation will erode the long term spending power of your savings. Leaving your children’s savings in an Irish bank, under the management of the Irish state (like the Solidarity Bond) or entirely in euro currency also carries certain risks in these turbulent times.

Do you have expensive credit card balances, with high double digit interest rates, that could be cleared faster if you used the child benefit money? Eliminating expensive debt at 18% or 20% makes more sense than getting a mere 2%-3% return from a savings account, even one ostensibly for the children.

If you are fairly debt-clear, it might be worth taking time now to find out more about the merits of buying precious metals or, when the markets settle down again, a low cost investment fund (like an ETF) made up of great, global companies into which you could pay on a monthly, cost-averaging basis.

Research these options yourself, or use the services of a good fee-based financial advisor.



Immobile shares


EC writes from Dublin: I am writing seeking advice on Vodafone Shares.  My mother passed away in August 2009 leaving 34 of Vodafone Shares.  We have looked at the option of transferring these shares over to one of the charities she supported.  However, the cost of the stockbroker's fees are greater than the value of the shares, the charities I have contacted are not in a position to accommodate this request. Surely there must be lots of people who find themselves in this situation, i.e. a holder of shares dies and it's left to the executor to dispose of them.  Would you have any suggestions?


It is unfortunate for the charities that the cost of transferring the 34 shares, worth only about €1.82 each now, is about €60. It would be helpful if the share registry company and your bank, which is also required to facilitate such a transfer – would waive their fees if the shares are being donated to a registered charity.  Perhaps you could ask them, and if that doesn’t work, offer to lobby for such a change on behalf of the charities.

Meanwhile, you might as well hold onto the shares in the hope that their value enough to someday justify the cost of the transfer.


Silver lining


GE writes from Dublin:  I have been researching a little buying silver instead of gold. While I am no expert or have anything to do with finance, I have discovered that silver is in lower supply than gold, because it has industrial uses as well as money and there has been huge demand for both in places like China. Many articles say it is underpriced compared to gold.  Any views?


Silver prices shot up over the year, peaking in early May at about $50 or €33 an ounce and then fell back sharply, mainly due to substantial profit taking. As I write, it is now selling for just under $38 or €26.50 an ounce (down 4% in 24 hours – a big swing.) You can follow the live price of silver, as well as gold at www.goldprice.org.

Silver prices are said to be more volatile, compared to gold, because it has both industrial and monetary uses and is affected by supply and demand. For example, industrial silver for the photographic industry effectively disappeared with the advent of digital cameras and computer photo files, but demand is growing strongly as an essential metal in the bio-medical industry and for high technology goods.

Silver is also a form of money – or could be again, which is the other reason why its price has soared during these uncertain times.  I was lucky enough to be persuaded back in 2005 to buy silver as well as gold:  the price of silver has risen by 186% since then compared to 139% for gold. 

Will it repeat this performance?  No one knows, but people who think pure silver (and gold) has more intrinsic value than paper and ink money issued by central banks and subject to being debased or devalued by them, prefer to keep some of their savings in precious metals.   






1 comment(s)

  1. declan conlon
    have about 12,000 mine and kids wondering about how to buy perth gold or silver where would i contact any advice would be appreciated thanks declan
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