Management of House finances

• Household as a financial unit within the economy


  How the family features in the economy
• How families contribute to the economy

  • Paying taxes (PAYE/PRSI/USC/VAT, car tax)
  • Spending income-generates employment & boosts economy
  • Some families financially dependent on state-social welfare payments
  • Children are the future workforce and taxpayers
  • Interest on loans, credit cards & mortgages supports banks
  • Families in debt require financial advice and assistance-money management skills are needed
• Sources of Household Income

  • Salary/ Wages
  • Social Welfare
  • Benefits (Child benefit, Pensions)
  • Interest- Savings
  • Dividends-Shares
  • Income from rented properties
• Gross income


  Total income before deductions
• Net income


  Income after deductions
• Compulsory Deductions


  • PAYE
  • PRSI
  • Universal Social Charge
  • Pension levy (public servants)
• Voluntary Deductions


  • Private Health insurance (VHI/Aviva/Laya)
  • Personal Pension
  • Union membership
  • Savings schemes
• Influences on Household Income


  • Age
  • Gender
  • Socio-economic group
  • Culture
  • Education level
  • Occupation
  • Dual incomes
• Types of Expenditure


  • Essential expenditure (mortgage/rent, food, bills)
  • Discretionary expenditure (non-essential- clothes, magazines, holidays)
  • Fixed expenditure (pay at set time, same amount- mortgage, car tax, insurance)
  • Irregular expenditure (varies in amount, at various times- groceries, doctor's bills, car repairs)
• PAYE (Pay as you earn)


  Tax paid to Revenue Commissioners (schools, hospitals, Gardaí, teachers, nurses, roads)
• PAYE Tax Rates

  20% and 40%
• Standard rate cut-off point


  Amount up to which income is taxed at 20% (€42,000)
• Tax Credits


  Deduction from the gross tax (€1,875 for a single person)
• PRSI (Pay Related Social Insurance)

  Employees pay 4% on all income, employers also pay PRSI, used for the Irish social insurance fund
• USC (Universal Social Charge)


  Tax payable on gross income, goes towards health expenses, different rates apply (0.5%-8%)
• Types of Social Welfare Payments


  • Contributory payments (social insurance payments)
  • Non-contributory payments (social assistance payments, means tested)
  • Additional Benefits (don't depend on PRSI contributions and are not means tested, e.g. Child Benefit €140 per month)
• Jobseeker's Benefit


  Unemployed, capable of work, available and seeking work, max payment €232 per week, depends on previous average weekly wage, enough PRSI contributions paid
• Jobseeker's Allowance


  Unemployed, capable of work, available and seeking work, means (income) must be below certain level, enough PRSI contributions have not been made in previous year, max payment €232 per week
• Types of Pensions

  • State pension (paid by the state at age 66)
  • Occupational pension (set up with job by the employer, regular income/lump sum after retirement)
  • Personal pensions (set up by individual, not linked to employer, regular income/lump sum after retirement)
• Old Age Contributory Pension

  66 years, not means tested, paid enough social insurance contributions, max €277.30
• Old Age Non-Contributory Pension


  66 years, means tested, have not paid enough social insurance contributions, max €266/€276 over 80, also entitled to allowances
• Supplementary Welfare Allowance


  Weekly allowance paid to people who do not have enough income to meet their needs, little or no income, means tested, temporary weekly payment €230
• Working Family Payment


  Low income working families with children, family income must be below a certain amount (income threshold) for family size, you receive 60% of the difference between net family income and income threshold
• Budgeting


  Personal plan for how you intend to spend the money you receive, can be weekly or monthly, list all expenditure and sources of income, allocate money to expenditure, monitor spending, make provision for savings
• Benefits of Budgeting


  • Overspending becomes obvious
  • Monitor bank statements and reflect on spending
  • Avoid debt/ being overdrawn
  • Bills are planned for and paid on time
  • More security, less worry about money
  • Money is put into savings
  • You live within your means
  • Good credit rating with the bank
• Monthly Household Budget Allocations


  • Mortgage 25%
  • Food 25%
  • Household bills 15%
  • Savings 5%
  • Personal expenses
  • Travel
  • Health
  • Leisure
  • Childcare
  • Education
• MABS (Money Advice & Budgeting Service)


  State agency which gives financial advice to people with financial difficulties, helps people get out of debt and plan a realistic and sensible household budget, free, confidential, independent service
• Methods of payment


  • Cash
  • Debit card (Laser)
  • Credit card (Mastercard)
  • Contactless payment (tap card)
  • Direct debit (regular payments, variable amounts)
  • Standing order(regular payments, set amount)
  • Mobile phone app- Google pay
  • On-line banking (transfer funds and make payments)
  • Bill Pay (An Post)
  • Paypal
  • Revolut
• Types of Credit available


  • Credit cards
  • Overdraft
  • Term loans
  • Mortgages
  • Store cards
  • Hire purchase
  • PCP (personal contract plan-car)
• Advantages of Credit


  • Use of goods straight away
  • Necessary for purchase of houses/cars
  • Safer than carrying cash- credit card
  • Free credit with credit cards if balance is cleared on time
  • Some Hire Purchase offers are 0% finance
  • Sales increase, boosts economy- encourages spending
• Disadvantages of Credit


  • High interest charged
  • Debt increases
  • Encourages overspending and impulse buying
  • Hire purchase items can be more expensive
  • Goods may be repossessed if bill is not paid
• Credit Cards


  Visa, Mastercard, convenient (online shopping, shopping abroad, booking concerts etc), card is swiped and pin entered in stores or contactless payment, cash can be withdrawn at ATM but with extra charge per withdrawal, credit limit is established at the start, if balance is paid in full within approx 25 days of bill, no interest is charged, interest is charged on balance not repaid, generally 18%-22%, yearly government stamp duty €30
• Overdrafts

  Established amount set up on current account (e.g. €200), this allows additional borrowing on current account - go into minus figures, money coming into your account will clear money owed on overdraft, interest rate charged and yearly fee of €30
• Term Loans


  Customer borrows set amount and receives money upon approval, must pay back interest and set amount, the loan repayments are set over a term (e.g. 3 years) and are paid monthly, interest rates can be fixed or variable
• Hire Purchase


  Hire goods and pay for them in fixed instalments over set period of time, pay back cost of goods (plus interest), only own goods when last payment is made, many offers are 0% interest free, interest rates can be high, use of goods straight away, goods can be repossessed if payments are not made
• Details on a Hire Purchase Agreement

  • Cash price and Hire Purchase price must be listed
  • Description & location of goods
  • Amount to pay monthly, number and due date of payments (usually 2-5 years)
  • APR % (Annual percentage rate)
  • Ten day cooling-off period
  • Rights of customer and retailer
  • Any penalties that apply (e.g. late payment)
• APR (Annual Percentage Rate)


  Written as a percentage (e.g. 4.5% APR), allows customer to know the extra charges on credit options and to compare offers, APR includes interest rate and set up/management costs, APR must be on all credit advertisements by law
• Consumer Credit Act 1995


  Regulates/controls all consumer credit (mortgages, loans, credit cards, hire purchase), monitors credit advertising, stipulates the information required in credit advertising (e.g. APR), regulation of banks, insurance companies, credit unions etc is with the Central Bank of Ireland
• Advantages of Savings


  • Avoid the need to borrow
  • Security for the future
  • Earn some interest
  • Good credit rating with bank
  • Necessary to pay deposit on a house
  • Rainy day money/ buffer
• Factors affecting the choice of savings scheme

  • Ease of access to funds (Do you need to give notice?)
  • Risk involved (savings can be invested in stock market and bonds)
  • Tax (DIRT Deposit Interest Retention Tax charged on interest 33%, some schemes are DIRT free)
  • Rate of interest