Time to start saving - how to invest your spare cash

When it comes to saving, the advice is that it’s a good idea to just get started, in order to make your money work better for you.

“At this time of year, it’s good to get into the habit of putting something away into a savings plan. No matter how small the amount, because if anything it’s just a good habit to get into,” says Gearoid Cleere, a financial advisor based.

“During Covid there was so much money put on deposit because people weren’t spending it. There are billions sitting on deposit in the banks. We believe that people need to get a bit more for their money instead of leaving it on deposit and earning absolutely zero on it.
“Our Smart Savers Club offers a bit of growth on your money, especially if you build it up over a few years. It’s a savings plan that requires a minimum of €100 per month. It’s ideal for the likes of your children’s allowance to make an investment for college fees.
“For example, if you put in the full children’s allowance over 18 years, it roughly comes to €30,000, but with growth you will make another €10,000 on top of that.
“The Smart Savers Club is open ended and you can put it in for whatever term you like.”

How to invest in funds
Gearoid advises, “first we carry out a risk profile check with yourself, but the longer you leave your money invested, potentially the better return you are going to see. We would also recommend a period of 5 years+”

Risk works on a scale of one to seven. Seven being the highest risk. Most people will take a small element of risk, but they also want growth and security, and they can’t have it all.
Financial advisers will carry out a risk profiler on their client, this is a questionnaire and based on that information we will know your risk profile (1-7).
They will then find a fund in your risk category and invest your money, where you will earn some growth. They’ll even spread your money over a suite of various funds that come in under your risk category. At the end of the day, the longer you leave it in, the better growth you will get.

How risky are equities?

“Equities will always outperform cash over the long term. The term of an investment needs to be five years plus to make a decent return.
“Especially if it's for the children's education years down the road, it's madness leaving it on deposit, because you should be looking at market related products.
“If you need the money in the next year to three years, you don't really have an option but to leave that deposit or the credit union, because you will need access to it.

“People will say they don't want to lose their money and they get all worried about the markets, but there's so many options available taking in a risk scale from one to seven. ‘Seven’ is very high and ‘one’ is basically no risk.”
“Most people fall in either the three or four categories depending on their risk profile, but that's something a financial advisor can bring them along. If you've never been in markets before, start on the three, which is classified as low to medium risk, and we can move you along the scale if you are ready.

“For example, if you invested into Zurich Life fund over the past year and were on, someone low to medium risk, you could have made 3.8% growth. If you were at risk four you could have made 9% growth and that’s beating inflation.
“Now look at this investment over the last five years, risk three has made over 18.5% overall growth. Whereas risk five made 65%, which is a great return on five years, giving you 12% to 13% growth per annum.
“If someone came to me five years ago and gave me €100,000 and we invested, it would be at risk five. Today their €100,000 is worth €165,000.”

Bonkers.ie
A great tool for anyone that wants to look at the comparison of rates is Bonkers.ie. It compares all utility bills, insurance, and banking across the markets.
Gearoid brings me through another way of looking at the value of investments on this site:

l The general inflation rate in Ireland is 5.5%
l Deposit interest rates in banks is less than 1%
l Investment/saving plan at risk level 3 (medium risk) for five years, growth is 18.5% over the five years, which is 3.5% pa and means it’s starting to keep up with inflation. Here your money is working for you the longer you leave it in, the better a performance you are going to have on it.

There’s still a small element of me being risk adverse and I can’t help wondering about losing my hard-earned shillings on the markets.
The expert says, “we are not investing it into just one type of share, its being spread across a lot of different sectors, countries, and the markets. So, it negates the chances of all these markets decreasing all at the one time.
“Diversification is key when it comes to investments. Investments, savings, and pensions are all invested in a similar type of way. They just use a different structure, but at invested into the same structure.”

Gearoid set up Cleere Life and Pensions in 2015
Killeen Financial Services Ltd T/A Cleere Life & Pensions, Cleere Mortgages, easyquotes.ie is regulated by the Central Bank of Ireland
www.cleerelife.ie  www.cleeremortgages.ie