Viewing 11 posts - 1 through 11 (of 11 total)
  • Keeping track of home finances
  • zokes
    Free Member

    Up until recently, we’ve had pretty much all our financial dealings with one bank, and had separate savings accounts for short-term, long-term, children’s nest eggs, and credit cards. This has all made a certain amount of sense as interest rates were all reasonable and it meant we could easily keep track of each “pot”.

    However, we’ve now gone and done something complicated – bought our first house. This means that by far the largest interest rate is on the money we owe as the mortgage, and thus to my eyes there seems little point in keeping much in the way of liquid savings. We’re set up with our new bank as follows:

    1) Account 1 is the loan account, free re-draw facility on overpayments

    2) Account 2 is the current account, with free offset against the interest on the loan

    I think it makes financial sense to treat mortgage overpayments as our previous “long term savings”, the offset account as “short term savings”, and use the credit card where possible and pay it off in full each month.

    My question is what should I do about the two children’s accounts? To me it seems to make sense to pile all that against the mortgage also, but is there a way I can set myself up to keep an honest track of the interest each nest egg would have been earning in a savings account? That way I know how much we’d have to re-draw when it’s time to cough up without having effectively stolen compound interest from my own children.

    perchypanther
    Free Member

    However, we’ve now gone and done something complicated – bought our first house. This means that by far the largest interest rate is on the money we owe as the mortgage, and thus to my eyes there seems little point in keeping much in the way of liquid savings.

    Until your boiler packs in. ( insert other unexpected but expensive occurrence here as required)

    Some liquid savings to cover unexpected circumstances  is never, ever  a bad idea

    alanf
    Free Member

    Who is your mortgage lender?

    I have an offset mortgage and I can add or remove accounts (with the same lender) from the offset element.

    So I can have multiple accounts that contribute towards the offset but are kept separate.

    Might be an option to investigate.

    If you ever get to the point where the offset is met by the amount of capital held in the accounts, you can then decide to remove accounts from the offset arrangement and let the account accrue its own interest again.

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    zokes
    Free Member

    Some liquid savings to cover unexpected circumstances  is never, ever  a bad idea

    Normally I’d agree, but having read the small print, our re-draw facility is both instantaneous and free. Presumably if something like that happens I just re-draw the cash and fix it?

    zokes
    Free Member

    Who is your mortgage lender?

    I have an offset mortgage and I can add or remove accounts (with the same lender) from the offset element.

    I’m overseas so lender probably not much use.

    I can set up separate linked offset accounts at no cost. However, there is a limit on the total amount offset of $50k so this would stop being useful after a few years. There is no limit on overpayments or their re-draw at a later date.

    alanf
    Free Member

    The only other thing to consider then is to if you are getting the best interest rate having the capital in the offset or if you can get a better rate in an outside account, other than that it looks like you have it covered pretty much.

    the-muffin-man
    Full Member

    Just personal opinion this, but all your money in one pot is never a good idea. Spread it around. What would happen in a few years if you changed provider or moved house. Would the same flexible arrangements be available?

    Children’s accounts – for me I’d keep them separate, in their names so you can’t play with it. And I’ve no idea how you would calculate what is their’s when the time to hand it out comes? Do they have a percentage interest in your property value too seeing as they’re contributing to the mortgage!? 🙂

    zokes
    Free Member

    Children’s accounts – for me I’d keep them separate, in their names so you can’t play with it.

    I’m pretty good at not playing with it. Working on the sad reality that by the time they’re adults there’ll be mahoosive university fees to pay, and chances of getting a house deposit themselves will be even slimmer than the troubles we’ve had

    And I’ve no idea how you would calculate what is their’s when the time to hand it out comes?

    Yeah, that’s the problem I’m grappling with.

    suburbanreuben
    Free Member

    children’s nest eggs,

    Open up  Stocks and shares Junior ISAs. You’ll get a far better long term return than any savings account or offsetting against the mortgage.

    the-muffin-man
    Full Member

    I dare say you won’t mess with it, but if it’s in your name in the eyes of the law it’s your money.

    We don’t have control of our destinies though, and God forbid that anything should happen that could put you in financial difficulty, at least your kids share will be safe, even though it may not get as good a return.

    And read Martin Lewis’s bit about student debt (as it currently stands) – especially section 15…
    https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes

    zokes
    Free Member

    We don’t have control of our destinies though, and God forbid that anything should happen that could put you in financial difficulty, at least your kids share will be safe, even though it may not get as good a return.

    This is a fair point I hadn’t considered. I’d need to really see what Australian law said on this though, regarding just how separate it would be considered if bailiffs ever came knocking.

    The flip side of that is even kids are liable for tax on interest here, whereas of course you don’t pay tax on debt.

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