Making the most of my saving

MirandaP7

Hi, I'm 45 and have made the decision to move into my parents house for 3 years to get out of the rental market and actually get myself financially sorted. 
I'm on a pretty good wage now but due to rent, costs, a ridiculous amount of university etc I've always rented, been in and out of debt and never been able to save. So I'm cutting my costs, I shall contribute to my parents for bills, but mostly I'll be saving and hopefully will have a nice deposit or a sizeable nest egg..
However, realistically, as house prices rise, albeit slow or not currently, we don't know how much they will in 3 years. I want to know how I can really make my savings work and earn as much as possible. 
I do plan sitting with a financial advisor. I will pay off any debt and initially make sure I have at the very least a few months salary in the bank for back up as a starting point. 
My current thoughts are on having a cash ISA I can use if needed in an emergency, I'll have about 10% of my savings go there. A fixed term ISA for 60% of my savings and then an investment ISA for the 30% of my savings to earn from investments.. I'm not a huge fan of risk, but I understand 'you have to speculate to accumulate'....
Anyways, I guess my question is, am I missing anything that I could use to make my money earn more, what are the best accounts out there. Should I be thinking of other ways to earn more to save? 

eskbanker

The key question is when you're likely to need the money - if your three year window is intended to build a deposit for a property purchase then forget about investing, as it's far too risky to do so over that sort of timeframe (and little of the money would actually be invested for the full three years anyway if it's coming from regular income).

R_P_W

Just my opinion but you don't need to sit down with a financial advisor for this.

On a 3 year timeframe for needing access to the money you just have to find the best paying savings accounts/cash isa available.  You could consider premium bonds, you might get a better return than savings or you may get nothing.

I'm nit sure investing for 3 years is the best way to go.  On one side it is a third of what you are planning to save, so you aren't putting all your savings into investments.  What are your expectations on investment returns Vs cash? Typically to achieve better returns you have to be in stocks and shares (probably an index fund or global ETF), but 3 years is a very short timeframe for that - you could get a 50% return over 3 years or the market drops and you lose 50% - maybe extremes but what would the impact be if in 3 years you are significantly down on your investments.

Id suggest using a compound interest calculator online and playing around with some scenarios.  At the moment I think the best instant access return over your time period is going to be around 3.5% (without any intro bonuses etc).  If you get 3.5% based on what you are planning to save over 3 years does that give you enough to meet your deposit needs?  If it does, it's probably not worth adding more risk.  Its always nice to have a bit more, but you can count on investments being better over such a short timeframe.

BreakingGlass

R_P_W said:

Its always nice to have a bit more, but you can count on investments being better over such a short timeframe.

Did you mean 'can't'?

MirandaP7

Thanks,  that's good to know in terms of investing as others I talk to are all 'invest invest invest' but I think many of them are thinking for retirement at my age etc. I worked out I will have around £1000 a month to save,  once things are paid off in the first few months.

 I'll get looking at the interest calculator, (as I've been trying to workout in my head..income based on basic rates etc) 

Ideally I'd like to have a house deposit, but given the house prices, I'd be 48, so mortgages would be in the 20 year region and therefore expensive.. plus I don't want to entirely wipe out every penny I have and then end up struggling with the mortgage after buying. It's very difficult to see if I'd achieve home ownership. 

Newbie_John

I think the key point here is to save and limit unnecessary spending. If you continue with £1k a month - that would be £36k after 3 years.
Interest rates, or any kind of safe short term savings results in 4% so they will get you about £2k after 3 years. For 2% £1k, for 6% £3k - so you can see it's not as significant as the money you put aside.

Premium Bonds - chances near 0% in your case.
Investing - too risky nowadays for such period.
Cash ISAs - depending on your tax rate, pick whatever is best.

eskbanker

Newbie_John said:

Investing - too risky nowadays for such period.

Was it ever a good idea for three years?

Bobblehat

For clarity, do you have a lump sum already saved (you possibly hinted at this when mentioning ISAs) and propose saving approx £1000pm for 3 years? Or is it just the £1000pm going forward from now?

Albermarle

Be aware that financial advisors are not really interested in debts, mortgages or cash savings.
You need at least £50K/£100K  in investable money/pension,  before any would be interested.
Even if they were, their fees would be well out of proportion to your situation. 

TheMilkmansDad

Step 1 Pay of debts
Step 2 set up regular savers for the £1000
Step 3 once each regular saver matures move to highest paying interest saving account (ISA or non-ISA depending on tax position