David gives Financial advice on Galway Talks, 6th Sept. 2012

TOPIC:  “The Fear Factor” in Making Financial Decisions.

 COMMENT:  Unfortunately over the last two years a number of people made serious financial decisions as a result of fear possibly to do with the future of the Euro or the stability of Irish banks.  Generally it is regarded that if you make a financial decision based on fear it is probably the wrong one.  It is important to take a rational view of any financial decision you make and not overreact to events that you cannot control. 

Some people have made financial decisions based on the principle of fear and it remains to be seen how these will work out for them in the future.

Question:  I notice that deposit rates are falling and I am wondering what your advice is with regards to same?

Answer:  Deposit rates will continue to fall over the next number of months.  At present you can get a rate of circa 3.5% for 1 year.  However you must remember that at the end of that term the rate will more than likely be considerably lower than where it is currently.  If you have a time horizon which allows you to invest for a longer period than you should possibly consider some Capital Guaranteed Term Investments which would be more attractive in the longer term.

Question:  I signed a letter of guarantee for my daughter and son in law mortgage.  They are now in arrears and I am concerned as to what might happen in respect of my guarantee.

Answer:  This is a common situation that some parents are finding themselves in due to the downturn in the property market.  The unfortunate situation is that, if your daughter goes into arrears with her mortgage and matters get out of hand then it is likely the bank will call in the guarantee.  I would recommend however that you get her to discuss the situation with the bank and come to some sort of repayment schedule that would avoid calling in the security.

Question:  I have some cash that I want to use to buy Dollars.  What do you suggest?

Answer:  Buying foreign currency is a risky step to take as an investment.  This is due to the fact that currency rates fluctuate on a continuous basis and there is a possibility that you could lose some of your money depending on which way the rate goes.

Also you will find that you will get a far poorer rate for cash as opposed to moving your monies into a dollar account or purchasing a dollar cheque.  If you have a large amount of cash and are considering this as the option that your are interested in, please be aware that you may also have a problem with your bank when you try to carry out this transaction, as they may query you on where these funds came from.