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    • mrtickle90
    • By mrtickle90 15th Sep 18, 12:59 PM
    • 4Posts
    • 1Thanks
    Guidance on saving (60k target)
    • #1
    • 15th Sep 18, 12:59 PM
    Guidance on saving (60k target) 15th Sep 18 at 12:59 PM
    Long time reader, first time poster.
    I appreciate there's a lot of these questions and they're extremely monotonous, but i'm struggling with a path.

    I'm about to exchange on a property in the UK, my wife and I have been saving into a help to buy ISA, we are buying over the threshold price for the bonus, so not eligible. Diligently putting 200 a month to this. I can maintain this for the next two years, thereafter I will increase it to 1500 per month.
    So I have 200 pm x24 and then 1500pm x36.

    I'm targeting the savings for an extension. I know it will be at least 5 years before I need access to this money (from now). I earn 130k, wife's income is very modest (to the point it can be disregarded).

    I have currently a good chunk of outgoings, but budget a 10k fudge factor over fixed and predicted variable outgoings yearly. I don't intend to invest this and keep it as emergency fund.

    I have a loan, which assisted with the wedding (6k remaining from a 14k balance, 3.4%).
    I also owe my parents money for my training for my current job (which is being repaid at 1500 pm, and will be balanced in just over a years time - where the 1500pm will come from in two years time to be invested). My parents don't charge me interest and I have no fixed obligation or time-frame to pay this back, i'm doing it from a personal choice.

    Considering I have this money already allocated, the 200 and 1500, I will not miss this, so intend to save as best as possible. I am willing to be open somewhat to risk and don't mind terribly if the invested amount even decreased a little, considering the potential gains in this liquid market.
    The information I have read seems to point me towards a stocks and shares ISA, possibly a guided type (as i've never invested before). I'm open to suggestions on where to go, to maximise potential.

    Thanks for the advice in advance
Page 1
    • bowlhead99
    • By bowlhead99 15th Sep 18, 2:15 PM
    • 8,611 Posts
    • 15,751 Thanks
    • #2
    • 15th Sep 18, 2:15 PM
    • #2
    • 15th Sep 18, 2:15 PM
    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.
    Last edited by bowlhead99; 15-09-2018 at 2:19 PM.
    • mrtickle90
    • By mrtickle90 15th Sep 18, 5:42 PM
    • 4 Posts
    • 1 Thanks
    • #3
    • 15th Sep 18, 5:42 PM
    • #3
    • 15th Sep 18, 5:42 PM
    Great stuff, thanks a lot of the in-depth reply.

    I'll setup a savings account, feed to there and reassess in a couple of years.
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