Making the most of my daughter’s savings

PERSONAL FINANCE:Your queries answered

Q

I have a three-year-old girl and am trying to save some money for her. She has several accounts and I want to make the most of it for her future. We have already put €2,000 into a National Solidarity Bond for her and €2,000 into a 3.5 year government bond. We also save monthly into AIB’s Parent Saver account and Rabodirect for her.

She has another €1,100 sitting in her AIB Junior account, which attracts practically zero interest and this is what I would like to make more for her. This money is for easy access, for Christmas, special occasions etc, but we don’t really need to access it yet, if ever. However, I want it doing something for her, but still want to access it easily, if required. Do you have any recommendations? I was thinking of buying some shares.

- MR JD, Wexford

A

You certainly seem to have taken a proactive approach to your little girl's future. If you are looking to put the money somewhere safe where it will be easily accessible but earning money, you could do worse than looking at An Post's 30-day notice account. This currently offers 3 per cent per annum. At current rates of inflation, even allowing for the fact that the account is subject to DIRT, it will still earn you a return. And, of course, it is guaranteed. Outside that, you might want to diversify a little by putting the money into a unitised fund – some of which we give details for on the Investment page in the weekly Business This Weeksupplement on Fridays. These are subject to exit tax.

As to shares, this is a more volatile area. Returns can certainly outstrip deposit markets but, as many have now learned to their cost, you could effectively lose a lot of your money.

If we leave the euro, what happens to our savings?

Q

If Ireland were to leave the euro and then devalue the new currency, would our personal savings in euros be devalued and then changed to the new currency or would our euro savings remain euros until we individually changed them to the new devalued currency? Specifically, if we were concerned about our savings being devalued in this way, should we move them to a bank in another EU state while we still have that freedom?

- Mr MT, e-mail

A

The first thing to say is that leaving the euro is not even on the radar. The whole point of the current painful exercise with the IMF and the EU is precisely to ensure the continuation of the euro and our place in it.

Across the euro zone, there is an understandable concern that, if markets were able to force one member state out of the currency zone, it would simply set a precedent for similar attacks on other members and the ultimate destruction of the currency.

On the theoretical point, when we switched from punt to euro, there was no opt-out on savings. Savings held in Irish institutions were simply converted to the new currency at the conversion rate.

I cannot see how it would work any differently in reverse. I would assume that any move to a new currency would see savings denominated in that currency at the agreed conversion rate.

Obviously moving your savings to another euro-zone state would render the argument moot, unless, of course, it also came under attack.

In addition, such cross-border transfers will only exacerbate the position of the banks – for which ultimately we – the taxpayer – will foot the bill.

This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into. Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2. E-mail: dcoyle@ irishtimes.com