Average amount of savings???

JolllyG

Hi all, so I’m looking to get an idea of how much in savings other folk out there have? I have a work pension which I am lucky enough to say will pay off my mortgage when I retire. I have about £30k equity in my house and have £30k saved. I’m 43, have no credit card bills, store cards etc and my car is paid off. So what I’m asking is do I need to have more saved? How much a month roughly should you save? Any feedback would be good. Thanks

Lucys_Da

Well everyone’s circumstances will be totally different and as such just do the best you can. Some people will be savers and others will have the ‘you can’t take it with you mentality’. Savings amounts are only relevant depending on what you plan to do with it...

I’ve just turned 44 and it took me a long time to catch on to properly saving, as I was quite focused on moving up the property ladder. A reasonably expensive divorce 5 years ago ultimately cost me a few quid and ensured I moved back down the property ladder a little bit lol. However, my outlook has changed and I’m now in a different place and focused on saving - for what I’m unsure at this stage, but ultimately security I guess. I recently sold my property and have moved in with my new fianc!e so my own figures are slightly skewed for that reason. However, given mortgage costs and bills etc I believe I can make my money work harder for me at the moment not being on the property ladder.

I currently have the following:

£90k in an stocks and shares ISA that I manage.
£13k in shares
£76k in a savings account whereupon another 20k of that will go into my fianc!’s ISA this year and a further £40k will go into both of our ISA’s after April 5th.

I have a DB pension scheme with a TV of £310k and annual value on retire may of £9k currently.
I have a stakeholder pension scheme that I have built up over the past 10 years that is currently worth £215k. (My aim there is to ideally achieve £750k within the next 16 years).

I set up a JISA for my eldest daughter 4 years ago and invested approx £8k over the time and it is now worth approx £19k.

My level of monthly savings is as per below:

£500 per month salary sacrifice into my stakeholder pension
£250 per month towards my two daughters and one soon to be step daughters JISA (combined figure) - saving £1k per annum for each of them.
£1100 per month savings that I will put into my ISA at the start of each ISA year.

The rest gets swallowed up on bills, money to my fianc!e for my keep and child maintenance. I give myself a strict budget of £600 a month to live off, although that’s pretty much 100% disposable income.

I may try to squirrel as much away as I can over the next 5-10 years and go buy a nice site and build my dream home, or I may just let it build and this may allow me to retire a little earlier...I’ve learnt to not try to live too far ahead of myself.

I feel for the first time in my life in control financially. I enjoy studying the markets and managing my own money. I’ve so far invested well and have delivered good growth, but then it can all disappear in a flash or in a coronavirus storm. So I’ve learnt to enjoy the highs and not get too worried about the lows.

As I said at the start, do your best and at all times remember that living life is ultimately more important than money in a bank.

bowlhead99

JolllyG wrote: »

I have a work pension which I am lucky enough to say will pay off my mortgage when I retire. I have about £30k equity in my house and have £30k saved. I’m 43, have no credit card bills, store cards etc and my car is paid off. So what I’m asking is do I need to have more saved? How much a month roughly should you save?

It's completely impossible to say how much you 'should' save without knowing how much income you bring in and what sort of lifestyle you might want to support now and in the future

As it happens, I'm also 43, and do deliberately have be credit card balances (because promotional deals on credit cards are a cheap source of finance for my lifestyle and for funding pension and other investments with tax relief) and a car that I own and a property I live in, with more than £30k of equity in it, and have more than £30k in savings and investments. But unlike you, I don't yet have enough pension assets to cover the current level of mortgage with just the tax free lump sum. But that's fine as I have a decade or two more career to go. Statistically, I probably earn more than you. I don't currently have any kids.

How does any of that tell you how much *you* should save?

You are asking a community of people who have some sort of interest in savings and investments - as that's the name of the board within a money saving expert forum that you've joined. So, some of those people will have savings and investments way more than you could possibly expect to have yourself (because they earn a lot more than you, and/or don't have any dependents, and/or are particularly interested in savings and investments, and may be experts at it). Or may simply be sacrificing a comfortable lifestyle now to support a lifestyle later that they wouldn't have been able to afford without making really difficult and uncomfortable sacrifices now, but they have strange priorities.

Some people will have less than you. On average, people who are not interested in savings or investments don't have much in the way of savings and investments and they don't hang out on savings and investments forums. So if you benchmark yourself against the people who are here (who do like savings and investments, and understand them, and hang out in savings and investment forums), you'll be much lower in the league table than you would be if you benchmarked yourself against the population at large.

But none of that is important. What is important for you is what goals you have and how you're doing to get there. For example, imagine you want to retire at age 68 with an annual income of £25k a year in today's money. Hopefully you'll have worked enough for a full state pension by that point, which is £9k a year in April 2020 money. So you need to get another £16k a year from somewhere, in today's money.

If you didn't have a defined benefit arrangement - to have enough invested to take £16k of income every year from age 68 to 98, without eroding the capital because you want to keep money back for a few years of expensive later-life care and maybe give an inheritance to your offspring, you probably need £400k in real terms in a pension or ISA investments by the time you retire. Because a rule-of-thumb might be that you can draw 4% of your investment balance while it grows, without using up too much of the capital, and £16k a year is 4% of £400k.

So, if that was what you wanted to get, you might need to be putting a lot of money away so that you could increase your £30k of savings to £400k of investments in real terms (i.e. after adjusting downwards for inflation) over the next 25 years. That would be quite hard work. However, perhaps you have some personal or workplace pensions built up already, that isn't just going to be spent on paying the mortgage like the pension you mentioned earlier.

But other people don't want £16k of workplace or private pension income on top of their £9k state pension. They only want £10-15k total each year if they've paid off their property. As a couple, £20k a year might be fine, and if state pension provides £18k of that for the two of them, they only need £1k each of private income, which might be quite easy depending on interest rates and inflation rates over the years. Meanwhile some other people are living on £50k+ each and would think they could reduce their expenditure in retirement a bit, but not a lot - as they want expensive hols and fast cars once they no longer have to spend all their time at the day job.

So, can you see how useless it would be for someone to say that they save £200 a week, or £200 a month, or 3% of their net pay, or 40% of their gross pay, and expect you to compare your savings rate with theirs? You probably don't have average goals, so you probably should have an 'average' rate of savings. Being wealthier than some really poor people doesn't make you happy. Being less wealthy than some rich people would probably make you depressed. Having a middling level of savings is only appropriate if that rate of personal savings is enough to do what you want to do, with your life.

ian1246

I'm 30. Wife's just turned 28. Currently we have around £81,000-£86,000 Equity in our House (Assuming it is valued between £190,000-£195,000, figures given to us by a few estate agents last summer). We own both of our cars (Mine's a 2013 Ford Focus, 44,000 Miles & Wife's is a 2012 VW Polo, around 46,000 Miles - so neither being fantastically modern, but still fully functional... hopefully!) and have around £7,500 in emergency savings.

Pension wise, I ve done nearly 6 years working in the public sector (I can retire at 55, with 60 currently the latest I can ordinarily work until) so have another 25-30years to go. My Wife's Auto-Enrolment Pot is currently only around £4,500, albeit she also has a defined pension scheme from previous public sector employment, which the last pension forecast (last April?) was worth around £1,100 a year.

bostonerimus

You are asking an almost meaningless question as what other people need/have in savings has no influence on what you need. I know it's tempting to ask what other people have so you can see if you are doing ok, but you need to see if you are on track to provide enough income for you in the future.

FYI consider paying the mortgage off before you retire so you can use all your pension for income. I can be argued that it would be better to put the extra payments towards your pension, but going into retirement mortgage free is psychologically comforting and the extra mortgage payments are a diversifier.

Zero_Sum

I wouldn't describe using pension to pay off mortgage as being "lucky". Probably quite the opposite infact

Albermarle

Another way to look at it , is to have at least enough cash savings to support yourself for 6 months if you lost your job + a bit extra in case of some emergency expenditure .
Above that level then there is a debate /personal preference of whether to keep higher cash savings or invest the money in a pension or S& S ISA.

kuratowski

The proportion of your income you save increases the more income you have. (At least, according to economic theory; of course empirically there many who spend more than they earn, and this happens just as much for high earners as anyone else.)

Anyway my advice to the OP is to echo the calls above: plan to pay off your mortgage before retirement, and make sure you are saving sufficiently for a comfortable retirement. How much you allocate between those two financial goals depends on the trade off between many different types of risk, and there is no one-size-fits-all answer.

bowlhead99

Zero_Sum wrote: »

I wouldn't describe using pension to pay off mortgage as being "lucky". Probably quite the opposite infact

Well, paying for something important and expensive like a house by making pension contributions or earning pension rights and then later using the proceeds (in the form of a tax free lump sum) to settle the mortgage, seems quite a good wheeze. Are you 'luckier' if you instead just pay tax on your income and pay the mortgage bill out of what's left after tax?

Zero_Sum

bowlhead99 wrote: »

Well, paying for something important and expensive like a house by making pension contributions or earning pension rights and then later using the proceeds (in the form of a tax free lump sum) to settle the mortgage, seems quite a good wheeze. Are you 'luckier' if you instead just pay tax on your income and pay the mortgage bill out of what's left after tax?

I'll chose to overpay & save on the compound interest. Then use pension to enjoy retirement.

bowlhead99

Zero_Sum wrote: »

I'll chose to overpay & save on the compound interest. Then use pension to enjoy retirement.

The compound interest on a low risk loan (mortgage secured on a house) is likely to be lower than the returns on an investment portfolio. That's the reason why I make relatively small mortgage overpayments using my taxed employment income and instead prefer to put the money into a pension offering huge tax relief. On top of the tax relief, there's an expectation of long term investment returns of inflation plus 3-5%; rather than overpaying the mortgage which is at 1.94% (CPIH inflation plus 0.5%). I would rather have 3-5% compounding gains than 0.5% compounding savings, even if tax-efficiency wasn't an issue, which it is.

Still, we're all different.