saving advice

countingstars

Hi,

I've been visiting the MSE forum for the last few months but have only just decided to join.

I recently got my first 'grown up job' with a 'grown up salary.' Prior to this, I'd been working in retail for minimum wage so I've very excited about this. I've never had the opportunity to save since I used to get paid very little. But now that's about to change. After taking away my usual expenses, I'll have around £800 to save each month for my life savings.

Ideally, before I start saving the £800, I'd like to build up a £500 emergency pot which I'd like to store in one of my unused current accounts. That way I can keep the debit card in my purse so I have instant access. (I think it'd be a good idea to have some funds in a different bank in case of any computer/ATM meltdowns like we've experienced as of late.)

Does anybody have any ideas/advice on where I can put the £800 p/m? ISA, regular saver, flexible saver? I've read the pages on this site regarding savings however, I'm interested in more personal opinions.

Thank you very much!

atush

Who are you working for, and what pension do they have? You need a pension.

What plans do you have short/medium term? Ie are you saving for a car, hoioliday, house deposit? when do you expect those purchases to start?

For your first 800, if your employer has a pension join it and pay int he max to get the max employers contribution (we like to call that Free Money here .

As an easy example (adjust amts for your case) if you put 80 into a pension it will become 100 instantly as it gets tax relief- you don't pay tax on this money so the govt gives the tax paid back to your pension. if this is an employers pension and they pay in 100 too, then you get 200 into your pension that costs you only 80. Plus you will probably get back your NICS on that 100 if done as salary sacrifice so it miught cost you less tan 80.

I like to call 200 for 80 or less a RESULT.

Ok, that is pension. Save whatever else into your emergency pot. I would have at LEAST 1K in it, but 3 months outgoings might be better over the longer term. I would save it not in your old current acct, but in a new one from one of the providers who gives interest of 3%.

Then save additional for your short term needs in cash. then spreading to S&S isas for medium/longer term savings once you have enough for emergency and short term.

PeacefulWaters

countingstars wrote: »

I recently got my first 'grown up job' with a 'grown up salary.' Prior to this, I'd been working in retail for minimum wage so I've very excited about this. I've never had the opportunity to save since I used to get paid very little. But now that's about to change. After taking away my usual expenses, I'll have around £800 to save each month for my life savings.

Ideally, before I start saving the £800, I'd like to build up a £500 emergency pot which I'd like to store in one of my unused current accounts. That way I can keep the debit card in my purse so I have instant access. (I think it'd be a good idea to have some funds in a different bank in case of any computer/ATM meltdowns like we've experienced as of late.)

Does anybody have any ideas/advice on where I can put the £800 p/m? ISA, regular saver, flexible saver? I've read the pages on this site regarding savings however, I'm interested in more personal opinions.

This is the sort of post that is a joy to read. So sensible. You may never be better off than you are now, so maximise the benefit.

Some ideas how to organise yourself:

CONTINGENCY FUND:
Get to three months' net pay ASAP and then look to build it up to six months at a slower rate after that. This exists only to replace income that's lost to illness or redundancy. An easy access dash ISA may be appropriate.

PENSION:
Maximise any matched funds from your employer but look to get c20% of your gross salary, including employer contributions, heading towards your retirement pot. If available, utilise salary sacrifice to maximise tax/national insurance relief.

SHORT TERM SAVING:
Known annual occurrences such as holiday, car insurance and service, Christmas. Unknown occurrences such as needing a new laptop, an impulse gadget purchase, having to pay an insurance excess, replacing a fridge freezer that dies. I budget £500 a year for the latter as a homeowner. Typically an easy access savings account, but look at the links above to see how you can exploit current accounts with a standing order in and then out again.

MEDIUM TERM SAVING:
New car, house deposit, extra special holiday. The big things in life that matter to you. Do something even if you have no specific plans. A mix of regular saver accounts, term deposits, fixed rate ISA and, as you close in on your purchase easy access savings account.

LONG TERM SAVINGS:
I'm thinking regular payment of £50pm (minimum) into a fund for something over a decade off between buying a house and retiring. Kids' education, a year off work to travel, an extra special cruise or anything else. Typically a tracker fund stocks and shares ISA but as the fund builds in size you might want to switch to a self-select stocks and shares ISA an invest for a hobby.

Oh, and keep enjoying life!

countingstars

atush wrote: »

Who are you working for, and what pension do they have? You need a pension.

What plans do you have short/medium term? Ie are you saving for a car, hoioliday, house deposit? when do you expect those purchases to start?

For your first 800, if your employer has a pension join it and pay int he max to get the max employers contribution (we like to call that Free Money here .

As an easy example (adjust amts for your case) if you put 80 into a pension it will become 100 instantly as it gets tax relief- you don't pay tax on this money so the govt gives the tax paid back to your pension. if this is an employers pension and they pay in 100 too, then you get 200 into your pension that costs you only 80. Plus you will probably get back your NICS on that 100 if done as salary sacrifice so it miught cost you less tan 80.

I like to call 200 for 80 or less a RESULT.

Ok, that is pension. Save whatever else into your emergency pot. I would have at LEAST 1K in it, but 3 months outgoings might be better over the longer term. I would save it not in your old current acct, but in a new one from one of the providers who gives interest of 3%.

Then save additional for your short term needs in cash. then spreading to S&S isas for medium/longer term savings once you have enough for emergency and short term.

I work for the ... world's local bank. Lol, I feel strange saying their name outright. Are we supposed to? Is it allowed? Anyway, since I've started, I'm not too sure what the pension is and how it works but I will find out and add to it. One question, what happens to your company pension if you decide to change companies letter? Does it get transferred over?

Thanks for the tip on the pension. I'm going to try and get that sorted out as soon as possible.

I have a small car right now however, I have no desire to upgrade any time soon. I am thinking of going on holiday to Canada next year (August 2015) so I would like to save up for that. No plans on a mortgage or house deposit until another five years or so but I would like to slowly build my savings up for that.

Ah, I forgot about the 3 months outgoing fund. I'd like to get that done asap, just in case and I'll transfer my emergency fund into a better paying account rather than using my old Lloyds one.

Never had a ISA before since I've never been in a position where I could save much but I'm definitely going to open one when the new tax year starts.

Thanks for all the tips! :j

countingstars

PeacefulWaters wrote: »

This is the sort of post that is a joy to read. So sensible. You may never be better off than you are now, so maximise the benefit.

Some ideas how to organise yourself:

CONTINGENCY FUND:
Get to three months' net pay ASAP and then look to build it up to six months at a slower rate after that. This exists only to replace income that's lost to illness or redundancy. An easy access dash ISA may be appropriate.

PENSION:
Maximise any matched funds from your employer but look to get c20% of your gross salary, including employer contributions, heading towards your retirement pot. If available, utilise salary sacrifice to maximise tax/national insurance relief.

SHORT TERM SAVING:
Known annual occurrences such as holiday, car insurance and service, Christmas. Unknown occurrences such as needing a new laptop, an impulse gadget purchase, having to pay an insurance excess, replacing a fridge freezer that dies. I budget £500 a year for the latter as a homeowner. Typically an easy access savings account, but look at the links above to see how you can exploit current accounts with a standing order in and then out again.

MEDIUM TERM SAVING:
New car, house deposit, extra special holiday. The big things in life that matter to you. A mix of regular saver accounts, term deposits, fixed rate ISA and, as you close in on your purchase easy access savings account.

LONG TERM SAVINGS:
I'm thinking regular payment of £50pm (minimum) into a fund for something over a decade off between buying a house and retiring. Kids' education, a year off work to travel, an extra special cruise or anything else. Typically a tracker fund stocks and shares ISA but as the fund builds in size you might want to switch to a self-select stocks and shares ISA an invest for a hobby.

Oh, and keep enjoying life!

Hi and thank you!

Wow, there are actually names (contingency fund, medium term, long term ...) I used to call my various tiny bits of savings shoe fund, going out fund, make-up fund ... :rotfl:

But yes, I think it makes things much simpler when you can put your savings into various categories. I would love to make a good start on my pension and aside from that my main priority would be to set up the contingency fund first. Then I can decide between my short term and medium term savings. I think for the long term, I'll start by putting in £100 p/m for now. That gives me £700 to play with. I plan on going on holiday next year and once saving for that and filling up my contingency fund is out of the way, I can think about adding more to my long term fund.

Thank you so much. It really helps when you can keep savings separate so you know exactly what they're there for and how much you need to add to each. It's never been explained to me that way before. At school, we were told about 'savings' and 'pension' and not much else. I'm going to draw up a rough plan and play around with the numbers until I can come up with something that suits my pay/plans.

Thank you!

PeacefulWaters

countingstars wrote: »

Wow, there are actually names (contingency fund, medium term, long term ...) I used to call my various tiny bits of savings shoe fund, going out fund, make-up fund ... :rotfl:

And there's nothing wrong with having sub-accounts that break your planning down further. Although some would prefer to use a spreadsheet! There's no right way and wrong way of going about it, although keeping a reasonable level of discipline will allow you to maximise things.

But yes, I think it makes things much simpler when you can put your savings into various categories. I would love to make a good start on my pension and aside from that my main priority would be to set up the contingency fund first. Then I can decide between my short term and medium term savings.

Sensible.

I think for the long term, I'll start by putting in £100 p/m for now. That gives me £700 to play with. I plan on going on holiday next year and once saving for that and filling up my contingency fund is out of the way, I can think about adding more to my long term fund.

Speaking generically, it's probably the lowest priority. I just think kicking it off early can work wonders.

Working for a bank means you should also make a priority of finding out about their employee share schemes.

Sharesave - heads you win, tails you break even. If the markets are kind you can make significant gains.
Matching shares - tax relief and free shares.
Share awards linked to annual bonus.

They don't have to offer anything, but many banks do. There can be big gains made if you play the system well. There may well be more than the examples outlined above. But remember to diversify away from single shares as soon as it's tax efficient to do so.

http://www.employeebenefits.co.uk/home/hsbc-to-launch-new-global-employee-share-plan/102710.article

Never had a ISA before

It's just a savings account that doesn't deduct tax from the interest.

countingstars

PeacefulWaters wrote: »

Working for a bank means you should also make a priority of finding out about their employee share schemes.

Sharesave - heads you win, tails you break even. If the markets are kind you can make significant gains.
Matching shares - tax relief and free shares.
Share awards linked to annual bonus.

They don't have to offer anything, but many banks do. There can be big gains made if you play the system well. There may well be more than the examples outlined above. But remember to diversify away from single shares as soon as it's tax efficient to do so.

That sounds like a good idea. It makes sense to take advantage of what they're offering however, I have very minimal knowledge about this type of stuff. I've just gotten my head around ISAs. I think I need to do my homework and ask plenty of questions regarding this. It's definitely something I want to get involved in. Thank you for pointing that out. I'll be sure to ask about this at work.