Starting on the savings ladder...

startingtosave

Hello All, I've been an avid reader of MSE for some time now while I've been working to get myself credit card debt free - achieved recently I'm in my twenties, single and a graduate and I bought my first house about a year ago which drained every penny I had in savings at the time and also put me in credit card debt for the first time.

Now I've been able to start saving a modest amount every month again and as I haven't really any idea what I'm doing beyond filling up my ISA allowance, I think the time has come to ask for some advice. Hopefully you guys will be able to point me in the right direction and give me some things to think about!

I'd initially like to build up an emergency fund and have set myself the goal of having a couple of months wages in savings by Christmas. After this, I am unsure of what would be my best strategy with regard to saving, my pension and paying off my mortgage.

I'd be keen to hear your thoughts and suggestions on my current plan as well as your advice for my future savings. I'm not sure whether once I have an emergency fund in place if I should concentrate all my free cash on my mortgage and pension funds or whether I should continue to build up my savings more while the interest rate on my mortgage is low and it's not costing me as much as it may do in interest in a few months!

Many thanks in advance - looking forward to discussing this with you!

opinions4u

Your approach seems fine.

But you should look at your loyalty to Nationwide and ask what's in it for you.

Sites like www.moneyfacts.co.uk/savings will help you track down better rates, such as Principality Building Society's Regular Saver account paying 4% interest or The AA and their easy access account paying 2.8%.

Your pension v mortgage v cash question is a cracker. Ideally all three! I would aim for a contingency fund of 6 months net pay, make sure those short/medium term savings needs are covered off (e.g. next car, next washing machine etc) and then I'd split what's spare between pension and mortgage. Possibly considering a monthly contribution to a stocks and shares ISA for that medium/long term period.

Great start though!

Primrose

You seem to be doing very well to have got your finances so well organised. I'd certainly focus on getting that Emergency Savings Fund up to your desired limit as I think we're in for a rocky time ahead. As you're fairly new to home ownership and I don't know the state of your house, you might want to designate one of your savings accounts for home/car maintenance, quite apart from your Emergency Fund, as issues regularly pop up to derail savings.
Continue to use your Cash ISA allowance as a priority. As for the mortgage/pension issue, you could continue your add extra small contributions as you can afford it, but for another year at least, I'd concentrate on stabilising your savings programme to give yourself a firm financial base.

startingtosave

Thank you for your replies, your advice is appreciated and it's reassuring to hear that I'm on the right track. It's quite daunting starting from scratch again! I also think that there are going to be rough times ahead with rising interest rates and the like and so I'm prioritising my emergency fund so that I have something to fall back on if everything goes pear shaped!
I'll also take into account your comments about looking at savings accounts outside the Nationwide - for now I like having everything in one place as I can keep track of my different accounts easily online but hopefully as I start to see my funds grow, interest rates will be of more importance and I'll definately look into other options.
Thanks again for your responses.

edinburgher

It's quite daunting starting from scratch again!

Well, you do own a home now, so it's not as if you've nothing to show for it

Wd on the planning - sounds like you've got everything under control.

-Maximise the rates on your savings accounts (don't diversify unless you are getting better rates)
-Save that emergency fund (is it based on a specific amount - i.e. '2 month's salary' or is it just an arbitrary figure?)
-After that - mortgage overpayments/investments/pension - the world's your oyster! I take it you don't have access to a work pension? Are you a higher rate tax payer? If so, pensions might prove additionally beneficial...

startingtosave

I know, I'm pleased to have got on the property ladder at quite a good time, my house was recently valued at what I paid for it so I'm not in negative equity at least although I did spend about £15k on improvements after I bought it... hopefully if I sit tight for a few years the value will increase and I won't have lost that money... what will happen in the housing market is anyone's guess though.

To answer your questions, I'm not a higher rate tax payer and the £3000 emergency fund is just the maximum amount I could save by Christmas. Ideally I'd like to have a £5000 fund in place by this time next year that I wouldn't intend to touch unless times got really deperate. I'll then probably start a more usable emergency fund that I could dip into and replenish for day to day stuff like repairing/replacing appliances, house maintenance etc.

I'm so pleased I discovered the art of budgeting and planning ahead, it's scary to think about how clueless I used to be!!