How much should I aim for - in Savings

NuttyBird

Just a question - I'm starting to get a little pot of savings together - I just wondered if you have an amount that you feel you want to get to - or do you just save for ever? I have few little pots for different things and a bigger one (that I don't touch) which I think I will try and keep going for as long as I can?

atush

spam reported.

Nutty,

Start with 3-6 months spending in cash for your Emergency pot. This keeps you from getting into debt.

After that, it will depend on what/when the money is for from short term things like Hoildays, a new car, to medium term things like a house deposit/paying off the mtg, to longer term things like paying for a dependents education, to retirement etc.

Use Cash ISAs of you pay tax, and use S&S isas and pensions for investments.


Basically, you save continuously until you get to retirement where you tend to spend instead

robatwork

This is as much a question about psychology as about money.

Everyone has a slightly different attitude to saving.

For example you may feel warm and safe with your pot of savings in a bank account where it's safe.

Someone else may hate their pot only earning derisory interest and want their pot gambled - in shares, property, blackjack.

And someone else may prefer to have a little gold bar in a deposit box.

There's no right or wrong, just your attitude to savings and risk, and of course what you want to do with the money.

Atush ^^^ is right

Dragonista

I agree with the PPs.

For me personally:
3 months salary
Long term regular savings that I plan on using as a pension
Short term saving for purchases within the next 12-24 months (holidays, new computer, etc)
Mid-term saving for things like a deposit for a house, school fees, and so forth.

gkerr4

i don't agree with the 'pots' thing - its just "savings".

it needs moved around to reflect your risk tolerance and in any event to ensure it is working as hard as it can for that level of risk - be it savings, bonds, funds, equities, commodities and odballs like premium bonds (if thats your thing).

currently, for me, this means about 5% in current accounts for easy access, 70% in cash savings accounts (including cash isas, regular savings accounts and a small amount in premium bonds and, oddly, a full £20k in the santander 1-2-3 account as it is the best paying "savings" account). Then the remaining 25% are all in equities - again in a mix of ISA and regular trading accounts as well as spread bet positions for short-term trades). I've recently raised the % of equities from about 15% to 25% and i will continue to raise this to about 30-35% over the next few months.

I guess what i am trying to say is that you just need to make it work hard - and if you 'need' it - rather than having a dedicated pot for 3-months livign or whatever, you just need to "unwind" your savings in the right order - for me, that would be the cash savings first (from the worst % accounts), then the equities (losers first) and then the ISA's as i don't wish to lose years of tax free amounts.

Eco_Miser

I largely agree with gkerr4, but find the concept of virtual pots useful. That is, the money is all lumped together, then split according to how soon it will be needed; but in a spreadsheet (or a notebook) keep a record of how much you've saved (and spent) towards each of your goals.

As for targets, I didn't have any - I just saved everything I didn't spend (and mostly didn't spend on anything I didn't need). If you haven't spent it already on a house, or house contents, or a car or just living, you can spend it when you retire.

evenasus

I don't use the 'pots' system and I don't have targets either.

If you've been sensible and a 'saver' all your life, you can carry on saving in your retirement too.

Stubod

I prefer the "pots" system, and put aside "medium" time money for cars, (10%of any money earned), holidays (10% of earnings) and emergencies (5%). I then also plan to save 10% of any income for the longer term (ie retirement)....works for me....

Lomcevak

I don't have targets, as others have said if you spend less than you earn then savings build up naturally. However, I do have 'danger levels' (for want of a better phrase), and if i'm not meeting these then savings need to take greater priority in the monthly budget than other discretionary spending:

- an emergency fund capable of covering three unexpected spends in month, e.g. major car repairs, home repairs, new appliance etc. For me this is £2000 and if I ever dip into it then it needs to be built back up again immediately

- enough money to cover day-to-day expenses while looking for a new job.

The latter in particular varies a lot depending on circumstances; if you have in-demand skills and can relocate anywhere then this might be a month or potentially even nothing at all if you're confident you could find something else within your notice period. If you're settled with a house, mortgage, kids in school, specialist job etc. then it might be much larger, six months expenses or more. Better to be conservative than not.

I also hold enough in a current account to avoid living 'paycheck to paycheck' - i.e. that this month's income pays future bills, not the ones arriving this month. All annual planned bills are also saved for, and credit cards are only used for things that I could pay cash for if I wished. In total that means that the current account is rarely below about £4k to cover all that.

So for me the minimum benchmark is:

- current account £4k
- emergency fund £2k
- six months of living costs £16k

FWIW, married, three kids, mortgage, can't easily relocate for a new job, so the minimums are quite high for me. I'm currently in the phase of building everything back up after a nasty overspend on some building work that turned out to be more complicated than estimated.

Tiglath

I'm working on normal car costs + holidays in a savings account ie. dippable savings, 3-6 months of living expenses in a cash ISA not to be touched unless an emergency, and the rest in investments through my S&S ISA. I'm not planning on any house moves etc; I'm basically saving for retirement. When I get to the point where I'm saving more than my total ISA allowance each year, the excess will go into the highest interest rate 'normal' account I can find and be moved as an initial boost to an ISA each new tax year. My total pension pot is split across 4 old/current work pensions and I'll be rationalising those this summer as well.

jimjames

10% cash (or mortgage overpayments), 90% investments.

All the time you have an income prior to retirement then it is worth saving. Obviously if you had 100x your income already saved that would be different but for most people I can't see a point at which they would need to stop saving prior to retiring.