What would you do in this situation?

allegro120

Albermarle said:

As others have said, there is no point saving for a child if it means neglecting to make provision for your own later life.
Your child will presumably be happier to see their parent comfortable when older, rather than living hand to mouth.

At the time when the base rate was at its lowest LBG, Barclays, Santander and some BSs offered the top rates for children's accounts.  Today the only one worth using is Halifax Kids’ Monthly Saver (£100 p/m, 5.5%).

Emmia

Barkin said:

Emmia said:

ItchyScratchyShow said:

Hello all, 

I'm really hoping for ideas and advice.

I'm just about to pay off my final debt - my mortgage - next week and then I will be 100% debt free. In my early 20s, I got into a huge amount of debt. For the last 15 years (I'm 47) I've not really saved much, just laid everything into paying off the debt, which means I've only got about £2500 in hand which I've got in an ISA for emergencies.

Where money is concerned, wiping out debt has been a tunnel focus for me so I've not really paid much attention to savings and investments. I'm a bit overwhelmed where to start and how to get my money now working for me. To be honest, I don't really understand a lot of what I'm looking at.

What kind of savings or investment would you look into if you were me? At the moment, I have about £750 a month to put away, and would ideally like something accessible. I have an 11 year old child to also consider.

Please don't think I'm asking for 'financial advice' as such, I really would just appreciate a bit of wisdom to help me get started in what to look at.

Thank you so much in advance for any help.

If you're aiming for 6 months income as a buffer I'd hold that in different ways, so 1/3 as instant access cash, with some of the rest in a notice account and  the remaining money in a S&S ISA or tied up in someway 

Personally I wouldn't tie up emergency/buffer funds anywhere that I couldn't get it straight away, and definitely not in a S&S ISA where I might be forced to cash out at a loss.

It depends on the size of your buffer... I have 3 months pretty instant access, 4 months in an S&S ISA and 3 months in an account with notice. 

I'd draw from instant access, notice and then the ISA in that order, hopefully never needing to touch the ISA.

kempiejon

allegro120 said:

It was very long time ago, but I still remember the feeling when I paid off my mortgage, which was also my final debt.  Congratulations on achieving this goal.  
Re. £750 a month to put away. For maximum return you can open 3 or 4 regular saving accounts, the list is here https://forums.moneysavingexpert.com/discussion/6576962/the-top-regular-savers-discussion-thread/p1. 
Re. savings or investments. Investments involve risks - savings are protected. With savings you know what profit you are getting - with investments you don't and also have to be prepared to loose some of your money.

Doesn't it show how people look at things differently. I like cash it has a job it's excellent for shopping, buys me things and experiences but long term one knows it is gradually worth less as inflations devalues its buying power. I think we're still ahead of inflation with some interest rates, there's a risk it wont always be such. Building a pot to bail you out of problems should be cash - deciding how big a pot you need is the next question. Adding £750 per months is a great place to be in but eventually I'd be directing some of this new cash flow to my long term wealth. Pensions, ISAs stocks and shares, and then other assets.

Eyeful

SAVINGS: Low risk,  you expect to get out at least what you put, if not more.
Examples
Money in a Cash ISA or Savings account
(a) Money with NS&I is 100% protected.
(b) The FSCS protection up to £85k only applies to Banks, Building Societies and Credit Unions on their list.
Best interest rates look here:
https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html
(c) With money there will always be some form of risk.
 With safe savings, the risk is that INFLATION will reduce the buying power of the £ as time marches on.
(d) If its not in one of the above accounts then its an "Investment".

INVESTING: means putting your money at risk. You hope to get more out than you put in, but this this not guaranteed
1. Any money needed within 5 years should be in a Bank/Building Society account covered by the FSCS up to £85K.

2. Use tax shelters where possible  (a) Pensions (b) ISA's
3. You can make investing as simple or as complicated as you like.

4. Academic research repeatedly shows that most "active fund managers" after charges are applied,

    do not beat a MAJOR  GLOBAL WORLD INDEX. 

5. Think of investing in the stock markets as a game.

    Long term (say at least 10 years) its called "investing" odds of winning = HIGH.

    Short term (say few days/weeks) its called "speculating" or "trading" odds of winning = small

6. Before investing:

(a) Clear all expensive debt first (except for mortgage)

(b) Have a "Rainy Day" account for emergencies (6 months of house hold bills, is often quoted).

7.  The Simple method of investing boils down to this:

(a) Low Cost Multi Asset Funds (for Cautious types & those that want more Control)

     A ready made portfolio, where you pick the share/bond split, you are most comfortable with.

Example:  https://www.hsbc.co.uk/investments/products/hsbc-global-strategy-portfolios/#balanced

(b) Passive Low Cost Global Index Tracking Fund or ETF (for the Adventurous with a very long time frame) 

     Here its shares = 100%. It may produce the highest return but is the most risky.

Example: https://www.trustnet.com/factsheets/o/kldq/hsbc-ftse-all-world-index

 8.  SIMPLE INVESTING IN DETAIL (advantages, easy to understand  & implement).

(a) First watch this: https://www.kroijer.com/

(b) Then read these

     https://monevator.com/passive-fund-of-funds-the-rivals/

     https://monevator.com/best-global-tracker-funds/

9.  I suggest staying away from individual shares & crypto. 

Bonds

a. Short term rates are controlled by the Government.

b. Long term rates are controlled by growth & inflation.

c. The metric more to watch is the yield on 10 year gilts, as this directly reflects the confidence of the global bond markets in the UK’s financial outlook, particularly the ability of the Govt. to balance the books. This is the one that spiked after the Liz and Kwasi show.

LHW99

If you are working, you should be in an autoenrollment scheme offered by your employer. If you had opted out in order to clear the debt, then opt back in now - you get tax relief and an employer's contribution, which even at a minimum legal amount, are both "free money"

Once you have enough emergency savings, I would personally look at whether your employer would increase what they put in your pension if you increase what you will pay. Some will, some won't, but worth finding out.

I would also then put excess cash into regular savers. As that builds up, you could consider a ladder of 1 year, 2 year etc notice accounts (they can all be "cash ISA" types, so no need to worry about tax on interest). Cash ISA's can always be transferred into S&S ISA's later as your situation improves.

ShinyStarlight1

Eyeful said:

SAVINGS: Low risk,  you expect to get out at least what you put, if not more.
Examples
Money in a Cash ISA or Savings account
(a) Money with NS&I is 100% protected.
(b) The FSCS protection up to £85k only applies to Banks, Building Societies and Credit Unions on their list.
Best interest rates look here:
https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html
(c) With money there will always be some form of risk.
 With safe savings, the risk is that INFLATION will reduce the buying power of the £ as time marches on.
(d) If its not in one of the above accounts then its an "Investment".

INVESTING: means putting your money at risk. You hope to get more out than you put in, but this this not guaranteed
1. Any money needed within 5 years should be in a Bank/Building Society account covered by the FSCS up to £85K.

2. Use tax shelters where possible  (a) Pensions (b) ISA's
3. You can make investing as simple or as complicated as you like.

4. Academic research repeatedly shows that most "active fund managers" after charges are applied,

    do not beat a MAJOR  GLOBAL WORLD INDEX. 

5. Think of investing in the stock markets as a game.

    Long term (say at least 10 years) its called "investing" odds of winning = HIGH.

    Short term (say few days/weeks) its called "speculating" or "trading" odds of winning = small

6. Before investing:

(a) Clear all expensive debt first (except for mortgage)

(b) Have a "Rainy Day" account for emergencies (6 months of house hold bills, is often quoted).

7.  The Simple method of investing boils down to this:

(a) Low Cost Multi Asset Funds (for Cautious types & those that want more Control)

     A ready made portfolio, where you pick the share/bond split, you are most comfortable with.

Example:  https://www.hsbc.co.uk/investments/products/hsbc-global-strategy-portfolios/#balanced

(b) Passive Low Cost Global Index Tracking Fund or ETF (for the Adventurous with a very long time frame) 

     Here its shares = 100%. It may produce the highest return but is the most risky.

Example: https://www.trustnet.com/factsheets/o/kldq/hsbc-ftse-all-world-index

 8.  SIMPLE INVESTING IN DETAIL (advantages, easy to understand  & implement).

(a) First watch this: https://www.kroijer.com/

(b) Then read these

     https://monevator.com/passive-fund-of-funds-the-rivals/

     https://monevator.com/best-global-tracker-funds/

9.  I suggest staying away from individual shares & crypto. 

Bonds

a. Short term rates are controlled by the Government.

b. Long term rates are controlled by growth & inflation.

c. The metric more to watch is the yield on 10 year gilts, as this directly reflects the confidence of the global bond markets in the UK’s financial outlook, particularly the ability of the Govt. to balance the books. This is the one that spiked after the Liz and Kwasi show.

This is very helpful, thank you.

ItchyScratchyShow

Wow, thank you for all the replies - I wasn't expecting such a response and I'm really grateful for everyone taking the time to offer some words and great information.  

With regard to pensions - I have an old one from about 20 years ago that when I last checked (about 10 years ago) had 11k in it, and one that I've been putting away into for about 8 years in my latest workplace which has (by all accounts) a good employer contribution. I have no idea how much I have in that one, I will have to check that out. That's another thing I don't really understand and have just ignored...! I really am crap with this stuff but am hoping to change that!

I am still an employee at the moment, but would like to go self employed. Truthfully, a huge motivation for clearing off my debts was the thought of being financially as secure as I can be and working for myself. It's something I have explored over the last few years and have had success in picking up contracts. I do appreciate that it is different when relying on it as a main source of income though. 

ZeroSum

Paying off mortgage & leaving yourself very little in savings probably isn’t the best thing. Mortgage rates are still relatively low, my mortgage provider is offering rates that are lower than I can get in savings. Too many people have this idea that all debt is bad when it's more about the cash to debt ratio & how much you're being charged for your debt vs interest earned on cash. You can make debt work for you also (see stoozing)

LHW99

ZeroSum said:

Paying off mortgage & leaving yourself very little in savings probably isn’t the best thing. Mortgage rates are still relatively low, my mortgage provider is offering rates that are lower than I can get in savings. Too many people have this idea that all debt is bad when it's more about the cash to debt ratio & how much you're being charged for your debt vs interest earned on cash. You can make debt work for you also (see stoozing)

Although there is definately a psychological boost when a mortgage is paid off!

poolboy

Some brilliant advice as usual.  I would start the top regular savers as there's no risk and the top ones are 6-10%.  Build up a nice sum here, when they expire, withdraw your money and repeat the process.

Pensionwise I d see what employer contributes and pay in what I could.

I paid off my mortgage, OK not an optimal use of money, but you just can't beat the feeling of being mortgage free.

Well done and good luck