Mustachian wannabe needs your wisdom

[Beeapanda]

Dear Mustachians,

I have been reading the blog and the forum posts on and off for some time but I am now married, with an 11 month old boy and feel I should start to make smart financial decisions. I have a couple of questions to ask and hopefully one of you brave souls won’t mind giving me some advice.

Employment info : I am 36 years old, working full time and yearly I get: 115K salary + 18K bonus + 10-15K stock (fully exercisable after 4 years ) + company pays for 100% health insurance for me and 80% for my wife and kid. My wife and I decided she would stay at home to raise our child likely until he goes to kindergarten so my income is the only one.

Current savings and placements : 40K savings account + 21K third pillar + 18K exercisable stock (company stocks) + another 56K (company stocks) which will be released over the next 4 years

Main Expenses : 2.6K flat rent per month, 2 cars (one being paid off) for a total of 450chf per month plus 3.5K year insurance and license plates

Questions:

• I have 20K in a basic PostFinance 3a third pillar which I was going to use to purchase a home at some point in the future. After reading many of your posts, I am now thinking about investing long-term instead of buying a property and to continue renting. What should I do with the 20K I have in this 3rd Pillar? Should I move everything to VIAC, let those 20K work over the next 30 years and just stop funding it? Or should I move everything to VIAC and continue funding this 3rd Pillar if I don’t plan on buying a home?

• Looking to open a new bank account, N26 is meant to be available in Switzerland this year. Should I wait for N26 or do you recommend another online bank as an alternative? I’m looking for zero or low exchange rate fees, free ATM withdrawals (can be limited), sub accounts, e-billing, no maintenance fees…

• We receive 300 CHF per month for my son (allocation familiales) and would like to invest those for him, so that he has money for passing his driving license, for studying abroad or travelling later on. Do you have any recommendations? I’d like a safe investment product, where my wife and I both manage the account and neither can withdraw without approval from the other one and more importantly, our son cannot withdraw money until we allow him to do so in the future. Ideally, if he is not responsible by the time he is 18-20 years of age (we’re going to raise him to be but who knows), that we can still keep control of the account.

• Any suggestions in terms of portfolio strategy based on my current situation? I am not a huge risk taken to be honest and am only just starting to take my financial health and freedom more seriously.

Thanks in advance for your wisdom!

[Double_A]

• You can’t do much wrong by maxing out your 3a pillar. No matter if you decide to buy a house later on or not. VIAC seems to be the best right now, so if it’s not to complicated switch to it and make 5 accounts (for tax reasons when you retire).

• I personally wouldn’t trust those pure online banks with my life savings. Zak or Neon might work for you though.

• There aren’t really any particularly good options for children. Except maybe saving options from the banks, but they are not great and your kids get access when they are 18. Maybe just buy some World ETF for them and don’t touch it.

• Depends. What are your goals and in what time frame? You have a good paying job, so you probably don’t really need to save for anything you want short or mid term… Longterm would be a house or early retirement?

[Thaek]

What should I do with the 20K I have in this 3rd Pillar? Should I move everything to VIAC, let those 20K work over the next 30 years and just stop funding it?

Move to Viac, continue funding it. Tax savings are huge.

Looking to open a new bank account, N26 is meant to be available in Switzerland this year. Should I wait for N26 or do you recommend another online bank as an alternative? I’m looking for zero or low exchange rate fees, free ATM withdrawals (can be limited), sub accounts, e-billing, no maintenance fees…

N26 will start with Euro account only in Switzerland. Neon and Zak are not really main account ready (no e-bill, family accounts etc.). BCV offers accounts for singles (free from 10k) or family package (free from 15k), including free atm withdrawals at KB ATMs and 1x free withdrawal per month anywhere. For money exchange and paying out of country get free Revolut. For credit card payments within Switzerland get free Swisscard Cashback Cards

[Beeapanda]

Thanks for the reply!

• I’m still undecided in regards of the 3a Pillar. If I decide to never buy a home in Switzerland, I might as well stop funding my 3rd pillar and invest this money in ETF which I can have access to quickly should I want need cash for any business venture or even real estate abroad. Actually, can you use your 3rd pillar for buying real estate outside of Switzerland?

• I don’t intend on keeling more than 100K in any of those banks so, my money is safe according to the small prints. I’d just like to stop being ripped off by banks who profit from the money we save in our accounts while at the same time charging account maintenance fees, withdrawal fees, foreign transaction fees etc…

• That was the idea indeed, just would like something that is seperate from my holdings and ideally under my name and my wife’s name (parents in law keep referring to A** H*** fathers who keep all the money when parents divorce - not that this is going to happen here but still…)

• No immediate goal, just being smart about investing our money and making the most of it. Ideally return on investment would allow me to have my own business, or cut down on working time / years.

[Thaek]

I’m still undecided in regards of the 3a Pillar. If I decide to never buy a home in Switzerland, I might as well stop funding my 3rd pillar and invest this money in ETF which I can have access to quickly should I want need cash for any business venture or even real estate abroad.

If you are actually going abroad you can cash out 3a completly. If you stay in CH you will miss out on the huge tax savings and on the tax free dividends (In CH and next year in USA as well). Only you can decide if it’s worth it to you, the general recommendation is to have a 3a.

Actually, can you use your 3rd pillar for buying real estate outside of Switzerland?

You can only finance your primary place of residence via 3a. And if you leave the country you withdraw your 3a completely. Therefore such a scenario does not exist.

I don’t intend on keeling more than 100K in any of those banks so, my money is safe according to the small prints. I’d just like to stop being ripped off by banks who profit from the money we save in our accounts while at the same time charging account maintenance fees, withdrawal fees, foreign transaction fees etc…

That’s why I recommended BCV + Revolut + Swisscard Cashback as the package. This will be zero fees if done correctly. If you want to hold cash than look into WIR Bank savings account, up to 1% interest on 50k possible (only if you hold their Anteilsscheine as well, otherwise 0.7%)

[San_Francisco]

• Max out 3a. For me, would probably be a no-brainer at your marginal tax rate
• Optimizing your bank account fees might be sort of a „statement“, but potential savings will probably pale against other expenditure items.
• Forget Swiss banks for everything foreign currency spending, and choose EU PSPs (Revolut, Transferwise, etc.)
• Keep it simple on your son‘s portfolio. 50-50 bonds/equity. Maybe some other ratio, if you like. Could be with a EU bank/broker as well…

Any suggestions in terms of portfolio strategy based on my current situation? I am not a huge risk taken to be honest

Aren’t you already taking considerable risk by taking such a singularly large „position“ of your „portfolio“ in your current employer? Not only in company stock, but also (implicitly) in day-to-day and future employment income? It’s something I‘d at least consider diversifying against.

I recommended BCV + Revolut + Swisscard Cashback as the package. This will be zero fees if done correctly

That might be zero fees - but not zero costs, if you have to keep 10k/15k at BCV that you can better invest elsewhere. At an opportunity cost of just 1%, that’d 100 CHF - which could pay fees for many other bank accounts.

[Beeapanda]

Thanks for the suggestions! The 18k in stocks I can exercise and future 50k worth of stocks are gifted by my employer so not something that I chose. I have sold quiet a bit since joining the company 5 years ago and I wish I hadn’t. The stock was worth in the $300 region back then and is worth around $1600 nowadays (split in 3 a year or two ago so current price is over $500 but volume increased by three). I get about 10-15k worth extra a year which is meant to promote loyalty

[nabalzbhf]

The stock was worth in the $300 region back then and is worth around $1600 nowadays

You could say that of a lot of single stock, retrospectively, but it could have gone either way (in which case you lose your job and your money).

[Thaek]

That might be zero fees - but not zero costs, if you have to keep 10k/15k at BCV that you can better invest elsewhere. At an opportunity cost of just 1%, that’d 100 CHF - which could pay fees for many other bank accounts.

Only if you want to hold zero cash, which most people dont.

[ma0]

I checked again BCV. I seem to forget from time to time why I don’t have an account with them. Their package seems “cheap”, but then you discover that they give you only 1 nonBCV-ATM withdrawal per month. So basically the only positive thing they offer are ebill&co. Pass.

[Double_A]

but then you discover that they give you only 1 nonBCV-ATM withdrawal per month.

How much cash do you people need? And why not just take e.g. 500CHF out once and be done for the month?

[xorfish]

BCV + Revolut + Swisscard

Isn’t it easier to get zero fees with www.bcf.ch + Transferwise or Revolut + Swisscard Cashback?

As far as I can tell BCF is free if you only use ebanking. Wit a maestro card it is still only CHF 2.50 per month and you get unlimited withdrawals in Switzerland.

[Thaek]

Their package seems “cheap”, but then you discover that they give you only 1 nonBCV-ATM withdrawal per month. So basically the only positive thing they offer are ebill&co. Pass.

If you have a better alternative let me know. I don’t see how most people will usually need more than one ATM withdrawal per month outside of Kantonalbanken. Around 30% of all ATMs (at least where I live) are Kantonalbanken.

As far as I can tell BCF is free if you only use ebanking. Wit a maestro card it is still only CHF 2.50 per month and you get unlimited withdrawals in Switzerland.

How is this zero fee if you pay CHF 30 / year for the Maestro card. I rather take one withdrawal at any ATM and unlimited withdrawals at KBs for CHF 0 / year from BCV.

Anyway right now I’m mostly withdrawing with Sonect anyway, this way I can use the Credit Card for free and get Cashback on my Cash.

[San_Francisco]

Only if you want to hold zero cash, which most people dont.

True. Personally, I feel comfortable holding 2000-3000 CHF maximum, for unforeseen expenses. Admittedly, that might be different for larger families with pets and cards.

How much cash do you people need?

Hardly any. 100 or 200 a month. Kiosks, supermarkets, transport, municipal services… even some brothels seem to be offering card acceptance in Switzerland.

[ma0]

brothels

unlimited withdrawals at KBs

I don’t see it mentioned on their sites… if I have a BCV card, can I withdraw at BancaCantonale (Ticino) or ZKB? Are they all linked?

[Ed_Waadt]

Their package seems “cheap”, but then you discover that they give you only 1 nonBCV-ATM withdrawal per month. So basically the only positive thing they offer are ebill&co. Pass.

if I have a BCV card, can I withdraw at BancaCantonale (Ticino) or ZKB? Are they all linked?

Indeed, it’s not only BCV ATMs, it’s any Kantonalbank ATM and then once free per month at any other ATM.

But we should be all spending by using our rewards credit cards

[Bojack]

How much cash do you people need?

I can go for months without touching cash (which is kind of scary when you think about what would happen if the credit card stopped working). But indeed there are some people who go and withdraw 200 CHF every 2 weeks.

[hanniss]

I don’t see a reason why not to purchase a home in the near future. You are paying 0% real interest (1% for the mortgage minus 1% inflation). Sure, there is potential opportunity cost as you need to fork over up to 20% down payment, but you can use your 2nd and 3rd pillar for part or all of that down payment.

I have an account with Neon. The exchange fees are a little higher than with Revolut, but I like the people behind the bank. Met with some of them last week.

If you move away permanently from CH, the good thing is that you can take the second and third pillar money with you, without paying income tax. At least that was the case when I did it about 15 years ago.

hanniss

[Beeapanda]

Thanks for the advice!
I did open a Neon account and hope they develop it further as right now there are just 2 features missing for me (e-bills which is coming and joint account for my wife and I as we would like to just have the 1 accoun), otherwise everything is looking great! I have a Revolut card which is working great and then an AMEX Cashback and Migo Cumulus card. Not paying any fees is really refreshing! I transferred the 20k from my postfinance 3a to a Viac 3a account I opened and then added 6.8K for 2019. Opened an IB account and put 10K in there on a few ETF’s. Also playing a bit with Mintos, for fun right now as I only have €700 in there.

Thanks for everyone’s advice!