Help Me I'm Saving For A House

Cardozo

I’m looking for and fully understand I will be receiving unprofessional help here. I’m planning to save for a house. I have 2 years left in university and have never been in my overdraft, plus I have £1200 in my current account which is doing nothing.

My income per year is around:

• £3564 - Student Loan
• £4800 - Wage (Part Time Job)
• = £8364

My outgoings per year are:

• £300 - Mobile Phone
• £120 - left of Gym Membership (being cancelled with 3 months notice)
• £600 - Car Re-Payments @ 0% Interest (Family Loan)
• £2000 - For Day to Day Expenses
• = £3020

Funds to Save:

• £5344

Already had £1000 from last year and I get my loan in 3 installments. I opened a west brom websaver 3 which I placed my £1000 in upon opening and put £600 of my first loan installment in to it today. The bonus rate lasts until october next year IIRC.

My aim is to have £20,000 in 3 years time and I know it isn't possible with my current income but the 3rd year will see me looking at full time work if not a graduate employment on around £20,000 per year.

I don't really understand my saving options and have looked into shares, 3 years may not be a long enough investment but if it beats savings rates then it could be appealing for small sums. Although it appears investing in small sums leads to profits being eaten up by fees, unless you can offer any suggestions on the best method.

I currently have no intention of opening an ISA until next year as I don't pay tax anyway.

I should also mention my girlfriend is planning on saving with me too with the same aim of getting a house in 3 years time (although my target is my own). Our outgoings are pretty similar but she will be earning around £7k this year and £13k thereafter. She does intend to open an ISA. We have no issue with putting our savings together.

Does anyone have any advice for me/us?

Annisele

In your circumstances, I think a three year plan might be a little inflexible - you can't possibly know how much you'll be earning or what your expenses will be for the whole of those three years. You also don't know what house prices will be like in three years time, or what lending criteria will be.

It might be worth opening a cash ISA even if you currently don't pay tax (if you can find a decent rate). So long as the rules don't change, the interest you earn on that money will remain tax free even after you become a taxpayer - so contributing to an ISA now could benefit you for quite a few years.

Personally if I thought my investment horizon was going to be three years (ish) I'd be looking at saving rather than investing. Over that timescale, shares might well beat savings rates - but they also might tank. I wouldn't want to take the risk, but opinions will differ on that point.

B_Blank

There are so many variables. I seriously would just chill out and enjoy life. Of course you can save. But I would personally get rid of my student debt before I bought a house. You also need to think that housing might currently be in a bubble and to put all your money into property certainly isnt diversifying.

What is your reason for wanting to get a house in 3 years. Is it because you see it as a good financial move/investment or a good lifestyle choice?

snooping_around

...........

Cardozo

I live at home so my outgoing are going to be pretty constant. My hobbies are mountain biking and photography, both of which I'm already well equipped for. I'm 21 now so 3 years makes me 24, in my opinion, that would be a good time to get on the property ladder.

I read the MSE article about paying off student loans early and decided against that option. It's costing me less to keep it than I'm earning off it!

Cardozo

snooping_around wrote: »

I dont entirely agree with this. Say in a couple of yrs time you have 10K in savings and you are a tax payer. You can only put 5K in an ISA per yr, so you are left with 5K in a normal savings account where you have to pay tax on interest. You might regret not filling up your ISA in the previous yr. Might be better to put your savings in a cash ISA now unless you want to put your money in shares.

Hmm, well having thought about it, what's the latest you can get an ISA this year? My logic was If I saved only £3k by April it was pointless but I suppose by next year it would be £8k instead of just five. I think I will open one, but wait until the latest possible moment to open it. Cheers.

B_Blank

Cardozo wrote: »

I live at home so my outgoing are going to be pretty constant. My hobbies are mountain biking and photography, both of which I'm already well equipped for. I'm 21 now so 3 years makes me 24, in my opinion, that would be a good time to get on the property ladder.

I read the MSE article about paying off student loans early and decided against that option. It's costing me less to keep it than I'm earning off it!

A housing ladder? Explain that principle. It could be a housing snake if house prices fall.

Lokolo

Cardozo wrote: »

I live at home so my outgoing are going to be pretty constant. My hobbies are mountain biking and photography, both of which I'm already well equipped for. I'm 21 now so 3 years makes me 24, in my opinion, that would be a good time to get on the property ladder.

I read the MSE article about paying off student loans early and decided against that option. It's costing me less to keep it than I'm earning off it!

I wouldn't be aiming to be able to buy a house at 24, I would be aiming to have just a certain amount. Forget the house buying - your circumstances will be changing a lot when you graduate and you don't want to buy a house straight away when you've got a job (for example, I am in your position but graduated, I am not buying a house until at least 6 months in).

Cardozo

B_Blank wrote: »

A housing ladder? Explain that principle. It could be a housing snake if house prices fall.

Just a phrase.

Lokolo wrote: »

I wouldn't be aiming to be able to buy a house at 24, I would be aiming to have just a certain amount. Forget the house buying - your circumstances will be changing a lot when you graduate and you don't want to buy a house straight away when you've got a job (for example, I am in your position but graduated, I am not buying a house until at least 6 months in).

That seems like sound advice.

I slept on the idea last night and decided I'd open an ISA with northern rock and fund it with £1 then just before the deadline shift my saving from westbrom (slightly higher interest rate) and follow this principle until I start paying tax on my interest from a standard savings account (probably 2 financial years).

My target remains £20,000 although I'll be happy with £15,000. This is because if I'm still with my partner who is also saving we should have almost double that.

I looked at iii last night and considered some shares that are currently around the 30p mark for a 10% investment of my savings. RBS shares are 24p yet used to trade at 900p in the boom. As a long term investment, what do you guys think?

Lokolo

Cardozo wrote: »

I looked at iii last night and considered some shares that are currently around the 30p mark for a 10% investment of my savings. RBS shares are 24p yet used to trade at 900p in the boom. As a long term investment, what do you guys think?

I would start with a less risky and volatile share than any of the finance industry in this current climate.

Something like Tesco or Vodafone would be more suited to start with.

Cardozo

Lokolo wrote: »

I would start with a less risky and volatile share than any of the finance industry in this current climate.

Something like Tesco or Vodafone would be more suited to start with.

Do you think? I don't get much bang for my buck with the price of those 2 shares.