Just Started to Save

2006Kuredu

Hi All,

Was looking for some advice please, I am looking to start saving (Yes at 39 I should have done it years ago but hindsight is a wonderful thing!)

I saw an article - http://www.thisismoney.co.uk/money/saving/article-2953565/Kick-start-investment-habit-skipping-skinny-latte-morning-topping-Isa-instead.html

Which made me think, yes, I could afford £200 per month however I cannot work out how they believe that will turn into £72k after 20 years - It would be perfect if it did as I would like to retire at 60.

I guess my question is, what is the best way? Yes I have a mortgage so I know there is an argument to overpay that instead but with my £200 Id like to understand what is the best option for me to build a nice little nest egg. I currently put £50 into Premium Bonds (Yes I had a dream of winning that million!) and £50 into a Post Office Online Saving account so realistically I may be able to afford £300 per month if I cancel the above.

Thanks in advance.

HappyMJ

It's never too late. My suggestion would be to save into a regular saver account an ISA could be a good choice then once that matures find the best savings rate for the money to be transferred into. They usually offer a great introductory rate which after the introductory period is over is quite bad.

£200 times 12 months times 20 years is £48,000. Interest will increase the final figure but inflation will reduce the spending power of the money probably back to whatever you could buy with £48,000 in today's money....whatever is worth £48,000 today will probably cost double i.e £96,000 in 20 years. Just look for the best rate you can find and review it regularly.

2006Kuredu

Thanks, daft as it may sound is £300 a month worth putting in an ISA? I know its not a huge chunk of money but all I could afford.

masonic

2006Kuredu wrote: »

Which made me think, yes, I could afford £200 per month however I cannot work out how they believe that will turn into £72k after 20 years - It would be perfect if it did as I would like to retire at 60.

As has been pointed out, this is £48k invested overall in the 20 years and an average balance of £24k with which to generate those returns. To get to £72k, you'd need an overall return of 300% (5.6% per year over the 20 years) and that's achievable even after inflation if you invest at the higher end of the risk spectrum.

Thanks, daft as it may sound is £300 a month worth putting in an ISA? I know its not a huge chunk of money but all I could afford.

Over 20 years, the results of investing £300 per month are likely to be lifechanging vs. spending it.

2006Kuredu

Thanks Masonic - Ill start to put £300 away per month then, next thing is where to put it!

I know there is an argument to say overpay the mortgage but I do like the idea of having a "just in case" pot

kingrulzuk

10 years ago when I was 21 I thought the same if I save £500a month in 10 years’ time I will have £60000 in my savings. I think I did thatfor few months and then I was greedy and I wanted more so my target was goingup and up. And now that im 31 I have just under 300k.

2006Kuredu

Would the money be best placed in an M&S 6% interest saving account then? I am a higher rate tax payer so an ISA seems advantageous however looking at the Hargreaves Lansdown proposition it says you can come out with less than you invest

2006Kuredu

Wow Kingrulzuk - Thats impressive - You must have a seriously good income!

PeacefulWaters

If you're saving for retirement has the radical idea of investing within a pension wrapper been considered?

If not, why not?

For me, get 3-6 months net wage into an easy access account. Then pile the rest into pension, typically global growth funds, maximising employer contributions.

masonic

2006Kuredu wrote: »

Would the money be best placed in an M&S 6% interest saving account then? I am a higher rate tax payer so an ISA seems advantageous however looking at the Hargreaves Lansdown proposition it says you can come out with less than you invest

Not sure what numbers you are plugging into the calculator, but you should get a positive return from a cash savings account!

You need to weigh up the pros and cons of saving in cash vs. investing in S&S, because you won't have the same potential to grow your pot using cash accounts, whereas you need to be able to tolerate periods where your pot shrinks if investing in S&S.

Drp8713

As a higher rate taxpayer and with 20 year time frame in mind I think you would be mad not to use a pension.


For every £60 you pay in the government top up to £100 with tax relief.


Investing will beat saving over 20 years.


You can take 25% out tax free.


As you wont have a huge pot at the end due to leaving it late and only contributing a small amount monthly you will likely to be able to draw all of it tax free at the other end if you are sensible by keeping under your tax free allowance each year.