Guidance on saving (60k target)

All IMHO:

You have a goal (the home extension) which is only five years away. So I don't know what information you have read which is pointing towards a S&S investment ISA as the best option. On this site, people don't recommend investing (as distinct from saving) for short term five year goals unless you are a particularly risk-loving person. S&S investments are ideal for medium to long term objectives of eight to ten years plus. Some people would say ten to fifteen plus.

The reason for this is that investment returns are unpredictable and while they are likely to perform better than cash savings when averaged over a long time period with lots of ups and downs, the performance it is pretty much a gamble from year to year. If you invest for only half an economic cycle, you might get the down years and the nothing years and not any of the up years.

You will be putting away under £5k of the £60k in the first two years at £200pm and then most of the money would be invested in year three four and five. And of that 'most of the money' (with a five year goal starting at the beginning of year three), only the first of your £1500 monthly chunks would be 'invested' for the full 36 months. The last chunk would be invested for one month.So on average the total £50k+ has only been invested for a year and a half, and then you hit five years total and you are ready to do the home improvement.

It might take longer before you are quite ready to press 'go' on the home improvements, but having your money invested for only a couple of years is nowhere near long enough to take advantage of 'investment' options over straight savings. It's a coin toss whether you would be in profit or loss.

The most practical thing to do at first (i.e. your £200pm for first two years) is to use a 'regular saver' account with one of the banks or building societies (e.g. Nationwide) which pays 5% AER on up to £250 deposited per month. 5% is as much or more than you could comfortably expect from cautious S&S investments.

Then in a couple of years when you actually have the £1500 available, reassess what your options are at that point. There is no point planning now what specific product you might like to use in autumn of the year 2020.


If you want to be more aggressive / risk taker in pursuit of greater performance, I suppose you could consider that the first two years' money is going to be under 10% of the grand total goal and if you lost half of it by using overly-risky investments during a market crash / recession it would not be the end of the world... you would cover it in just another couple of months savings at £1500pm.

So instead of the obvious guaranteed 5% in regular saver accounts with Nationwide, M&S, First Direct etc, you could put your £200pm into a mixed asset fund on one of the DIY investment platforms. And then just use normal savings for the 'big money' that you have ready to put away in the later months. You would have to accept that the ~£5k invested in this manner may lose money, and over a five year period is just as likely to underperform the 5% savings account as outperform it.