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State savings vs Bank savings accounts

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  • 28-10-2014 1:06pm
    #1
    pwurple
    Closed Accounts Posts: 12,449 ✭✭✭✭


    Hiya,

    I'm trying to decide on whether the best return for savings for a child is in the state savings product, or elsewhere?

    Can someone else take a look at this and tell me if I'm working it out correctly?

    I currently have one of the 6 year childcare plus accounts, child benefit goes directly in (@130 per month)

    http://www.statesavings.ie/products/Pages/ChildcarePlus.aspx

    So, the problem with this account, is when I received the statement. One years worth of the funds is held in a non-interest-bearing account, and then deposited into the interest-bearing account for 5 years. @ 1.25% AER, DIRT free. This happens each year in turn, for 6 years.

    So, from what I can work out, 1.25% AER Dirt free is about equivalent to 2.00% paying full DIRT, which is high enough in todays market, but doable (I think with EBS?).

    However, my year of lost interest for the holding account is where it is not adding up for me. 130 euro per month for a year, at 1.25% is 3.37 ex DIRT, or 1.99 with DIRT.

    This compounds up over the year to:
    10.43 per child gross @ 1.25% ( 6.12 Net of DIRT)
    Or
    9.82 per child per year @2.00 Net of DIRT.

    So, for 2 children, over a 6 year saving term each, I *think* they would be better off by 117 euro total if I used a non-state product at current interest rates.

    Is this correct?


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