Household finances

• Social factors affecting household income

  1. Age

  Income tends to increase as individuals get older. Monthly outgoings also increase.

  2. Gender.

  Number of women working has increased, leading to more dual income families. Employment equality act helps ensure equal pay for equal work

  3. Socio economic status.

  4. Culture

  Salaries for the same occupation differ from country to country
• Sources of household income

  1. Wages and salaries
  2. Pensions
  3. social welfare payments
• Gross income: income earned before any deductions

  Net income: income earned after deductions, often called take home pay
• Deductions taken from pay

  Compulsory deductions: PAYE (PAY AS YOU EARN), PRSI (Pay related social insurance), USC (universal social charge)

  Voluntary deductions: private health insurance, pension contributions, union fees, savings
• Pay as you earn PAYE

  • A standard rate of tax at 20% applies to income up to a certain limit, called the standard rate cut-off point. This point is calculated by the Revenue Commissioners and varies from person to person, depending on individual circumstances.
  • A higher rate of tax at 40% applies to any income earned above a person's standard rate cutoff point.
• Tax credits

  Reduced the amount of income tax a person has to pay.

  Calculated based on a persons gross income and type of employment. The revenue commissioners sent each employee an annual tax certificate that list their tax credit entitlement and tax liability
• Pay related social insurance PRSI

  • taken from a person's gross pay by an employer and paid directly to the Revenue Commissioners. calculated as a percentage of a person's total income. The percentage a person is liable to pay depends on earnings and profession. Both the employee and the employer share the cost of PRSI payments. Individuals on a very low income are exempt from paying the contribution.
  • Income from PRSI is used by the government to pay for social welfare payments,
• Universal social charge


  Taken from persons gross pay by employer and paid directly to the revenue commissioners. Calculated as a percentage of a persons total income. Employees are liable to pay USC tax if their gross income is more than 13,000 annually
• Reasons for creating a budget

  1. Helps develop good money management
  2. Areas of overspending can be avoided
  3. Provides financial security
  4. Has a savings element
• Guidelines when preparing a budget

  • Estimate total income
  • list all expenditure
  • allocate a percentage of income
  • allocate savings
  • review and evaluate
• State pension


  Payment made to individuals over 66 years old who have made sufficient PRSI contributions
• Widows or surviving civil partners pension

  Payment to widows or surviving civil partners based on PRSI contributions of either the individual or their deceased partner
• Jobseekers benefit


  Payment to those who are unemployed but have paid sufficient PRSI contributions
• Maternity benefit


  Payment to pregnant women who made sufficient PRSI contributions and are on maternity leave
• One parent family payment


  Payment for men and women raising children without the support of a partner
• Child benefit


  Monthly payment to parents or guardians of children under 16 or 18 in full-time education
• Consumer credit act 1995

  Established to regulate credit agreements and protect consumers

  Key provisions

  • Cooling off Period: allows consumers to withdraw from credit agreements within a certain period
  • Full disclosure: lenders must provide complete information about interest rates
  • Credit advertising: regulates how credit products can be advertised, prohibiting misleading advertisements
  • Licensing of credit institution: requires lenders to be licensed
• Advantages of saving

  1. Financial security
  2. Achieving financial goals
  3. Reducing financial stress
  4. Interest earnings
  5. Preparing for retirement
• Factors to consider when selecting a savings scheme

  1. Security of savings
  2. interest earned
  3. Tax payable
  4. Access to funds
• an post savings schemes

  1. Deposit account: basic savings account allowing for regular deposits and withdrawals
  2. Savings bonds: bonds with a fixed term
  3. Savings certificate: term savings product often with a term of 5 to 6 years
  4. Instalment saving schemes: allows regular monthly deposits over a fixed term
  5. Nation solidarity bond: long-term investment bond with a 10 year term
• an post savings schemes pt2

  1. Demand deposit accounts: flexible accounts with no fixed term and unlimited deposits and withdrawals
  2. Notice deposit accounts: requires notice before withdrawal
  3. Special term accounts: Specialise with terms offering unique benefits
• Factors to consider when choosing an insurance policy

  1. Cost
  2. Independent advice
  3. Needs and family circumstances
  4. Cover overlap
  5. extent of cover
• Types of insurance

  1. Health insurance
  2. Life insurance
  3. Home insurance
  4. Car insurance
  5. Travel insurance
  6. Income protection insurance
• Advantages of having insurance

  1. Financial security
  2. Peace of mind
  3. Risk management
• Term life assurance


  Provides coverage for a specific period. If the policyholder dies within this term., death benefit is paid
• Whole life assurance

  Offers covered for the policyholders entire life, paying out upon their death
• Endowment life assurance


  Combines life assurance with a savings plan. Pays out on death within the term or at policies maturity.
• Income protection/permanent insurance 


  Provides regular income if you’re unable to work due to illness or disability
• Critical/ serious illness insurance

  Pays out a lump sum upon diagnosis of specific serious illnesses
• Private health insurance 


  Covers medical expenses for treatments in private hospitals
• Factors to consider when choosing a mortgage

  1. Interest rates: cost of borrowing money
  2. Incentives offered: benefits provided by lenders such as cashback or reduced fees
  3. Early repayment charge: charged for paying off the mortgage earlier than that agreed term
  4. Break from repayments charge: fees for pausing repayments
  5. Type of interest: method by which interest is calculated and applied to the mortgage
• Housing assistant payment HAP

  • eligibility: those on local authorities housing list
  • Operation: the local authority makes regular payments to landlords on behalf of the tenants
  • Advantages: enables individuals to find their own private rented housing
• Mortgage allowance scheme

  • Eligibility: existing local authority tenants or in receipt of social housing support
  • Benefit: provides an allowance over five years to help with mortgage repayments
• Rebuilding Ireland home loan scheme

  • Eligibility ; First time buyers who have been refused a mortgage or were offered insufficient finance
  • loan features: fixed rate mortgage over 25 to 30 years
  • Advantages: lower interest rates and government backing