Budgeting
A budget is the most powerful tool you have for managing your money and achieving financial health.
A budget shows you the flow of money in (income) and out (expenses) of your household and enables you to plan how you will spend your money. That way, you are less likely to make impulsive or unnecessary purchases.
Developing a budget might require some thinking but if you manage do it right, you will reap the benefits in the future. The best way to reduce your expenses is by starting to reduce your discretionary expenses, since non-discretionary expenses can be harder to adjust.
Look out for any annual one-off expenses such as your home, health, life and motor insurance – you may wish to spread their premium between different months in order not to be burdened with a lot of expenses with one pay cheque. You can also plan and save an amount each month towards these expenses in order to avoid any bulk payments, if changing premium dates is not possible.
In order to curtail your spending with regards to utilities such as water, electricity, internet and television, try to check if there are any offers or government subsidies from which you may benefit. For example it might be worth to save some capital to install alternative energy or change appliances if these lead up to monthly savings. You may also consider your telecommunications package to check if there is anything which you no longer need.
Frequently Asked Questions
This section gives you easy access to commonly-asked questions about banking, insurance & investments aspects.
Question: I have funds in a bank in Malta are denominated in euro. A relative of mine, who for many years resided in Australia, has an account denominated in Australian dollar with the same bank. If our bank fails, are we both covered by the same depositor compensation scheme?
The Depositor Compensation Scheme is a rescue fund for depositors of failed banks which are licensed by the MFSA. The Scheme, which has been in force since 2003, can only pay compensation if a bank is unable to meet its obligations towards depositors or has otherwise suspended payment.
The Scheme is managed by a committee appointed by the MFSA and is made up of persons representing the MFSA, the Central Bank, licensed investment firms, the banks and consumers.
The regulations (Legal Notice 369 of 2003) which transpose the EU Directive on Depositor Guarantee Schemes obliges the committee to compensate depositors following a process of due diligence which should not take longer than three months (which may be extended to another six months by the competent authority).
All depositors of Maltese banks are covered up to EUR100,000 (per depositor, per bank) and depositors will no longer have to bear the initial 10% of their losses.
Most types of deposit are covered, including current, deposit and savings accounts. Similarly, most depositors are covered by the Scheme. There are however some depositors who might not be able to claim. Companies which are permitted to draw up abridged balance sheets in terms of the Companies Act are also covered by the Scheme.
Joint accounts are divided equally between account holders where there is no indication of the share of each holder in the account. Each will be covered up to the limits prescribed in the Regulations, subject to eligibility. In respect of deposits held by a person acting as trustee or nominee for one or more beneficial owners, the deposit making up the claim shall be deemed to belong to such beneficial owners equally unless there exists specific information which may otherwise determine the beneficial interests of such persons.
A depositor can only submit one claim for all his deposits taken in aggregate against a failed licensed bank, including the depositor’s share in a joint account or a client account, less any amounts due to the bank (such as loans).
The Scheme covers deposits denominated in euro and deposits in the currencies of EEA countries whose currency is not the euro. This means that deposits in Australian dollar are not covered by the scheme.
In the unlikely event of a bank failure and the Scheme needs to compensate depositors, the payout period is 20 working days that are reckoned from the date when the competent authorities determine that a credit institution is unable to repay its deposit liabilities – with a possible extension of 10 working days in exceptional circumstances.
Credit Institutions are also required to be more transparent with regard to the information that they are obliged to provide to current or prospective depositors in connection with the scheme. The information on the scheme contained in advertising by participants will be subject to certain restrictions in order to prevent adverse repercussions on the stability of the banking system or on depositor confidence.
More information about the Scheme is available from www.compensationschemes.org.mt.
Question: I have been noticing multiple adverts on newspapers and TV advertising very good rates for fixed deposit account by banks which I had never been aware of. All these adverts claim that my deposit is protected under the Depositor Compensation Scheme but I want to make sure that none of these adverts is misleading – such as for example, enticing me to deposit my hard-earned savings with them on the basis that my deposit is covered by the scheme, when in actual fact it is not.
All banks licensed by the MFSA are required to be members of the Depositor Compensation Scheme. The Scheme provides a level of coverage of up to €100,000 for each depositor in the event that a bank becomes insolvent and therefore is unable to honour its obligations towards such depositors.
In light of the new regulations which came into force in August 2009, all banks are required to indicate clearly that they are members of the Depositor Compensation Scheme in Malta. Very shortly, all banks will also be providing information to their depositors (on demand or through their websites) relating to the scheme including the circumstances under which the scheme would pay compensation. This information is already available on the Depositor Compensation Scheme’s website (www.compensationschemes.org.mt) but banks are now also required to provide this information to depositors to enable them to understand better how the scheme works and whether and to what extent their deposits are covered.
In brief, the scheme covers deposits made by individuals and small companies which are allowed to draw up abridged balance sheets in terms of the Companies Act. The scheme covers deposits in the currencies of all EU and EEA (European Economic Area). Other non – EU currencies are excluded. There is no closing date as to the limit of €100,000 (as many depositors continue to think). The limit is per person, per bank so for example, if two banks are unable to honour their obligations at the same time, a depositor is covered for up to that limit for each insolvent bank.
As with diversification, there is absolutely no harm for a depositor to diversify and distribute his/her savings between different banks.
More information on the Depositor Compensation Scheme is available here.
How does it work?
- This product offers pensioners the possibility to translate part of the value of their property into a liquid asset.
- By entering into this contract, the pensioner will have more cash in hand whilst enjoying their retirement in their own home.
- Individuals who subscribe to this scheme will be essentially taking out a loan in exchange for regular income. The loan will be repaid when the property is sold.
Who is offering it and when?
- This product can be offered by licensed credit and financial institutions operating in or from Malta.
- MFSA is currently working on the regulatory framework that needs to be in place for it to regulate the equity release financial product.
- The equity release financial products regulations [Regulations’] will come into force on the 1st of September 2019. After this date no credit or financial institutions can offer such product without being duly authorised.
- Any licensed institutions providing such financial products will have one year to comply with the requirements set out in the Regulations published by the Authority.
Any tips?
- MFSA encourages interested individuals to seek independent professional advice and weigh their options before entering into an equity release transaction for the first time.
- It is your right to receive all the information you need to make an informed decision.
- MFSA will issue further updates once the framework comes into force. The public is encouraged to follow the Authority’s channels on Linkedin, Twitter and Facebook, or alternatively visit www.mfsa.mt for the latest updates.
Question: I would like to bring to your attention a problem many parents may be encountering. Once our children are 16 years of age they are told that they can have their own accounts. Knowing my children well, I went over to the bank to request information about my son’s account because I wanted to be certain that he is depositing his pocket-money. However, I was told that I could not be given such access as the account belongs to my son. I informed them that I was the parent and that legally he is still under-age and that my husband and I are still legally responsible for him. However the reply was that this was the practice in banking services and that the parents are consulted only if a request for a loan is made. I find this to be very wrong. At that young age many of them are still irresponsible and still need some guidance from the parents.
Article 188 of the Maltese Civil Code (Of Majority, Interdiction And Incapacitation) states that ‘Majority is fixed at the completion of the eighteenth year of age’. On the other hand, Article 971A of the Civil Code providing with the ability of children over sixteen years to open and operate bank account provides that ‘Notwithstanding any provision of this Code, a child who has attained the age of sixteen years may deposit money in an account opened by the child in his or her own name with any bank, and any money deposited in any such account may only be withdrawn by such child notwithstanding that such money may be subject to the administration, usufruct or authority of any other person. For all purposes of law the child shall with regard to the opening and operation of any such account be considered a major.’
In this respect, paternal authority ceases as soon as a child opens a bank account in his/her name.
Facilities may only be granted to a minor who has attained the age of sixteen years and such minor shall be deemed to be major with regard to obligations contracted by him/her for purposes of trade, if (i) he/she has previously been authorized to that effect by the parent to whose authority he/she is subject, by means of a public deed registered in the Civil Court or, where both parents are dead, interdicted or absent, he has been authorized by the judge of the Civil Court and (ii) a summary of the deed of authorization or of the decree aforementioned has been published by means of a notice in the Government Gazette and in another newspaper.
In this regard, minors who are traders authorized as aforesaid can by reason of their trade charge, hypotheca for personal purposes (home loan).
For instance, banks would not issue a credit card to young adults under 18 years of age. They may only do so if the primary cardholder is either the parent or legal guardian – in that case, the supplementary cardholder may be the young adult. Any debts incurred by suchte and even alienate their property, without any of the formalities prescribed by the civil law. It is important to note that in these instances facilities may only be provided to minors in relation to their trade (business loan) and not supplementary cardholder would be under the responsibility of the primary cardholder.
