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How much savings do you have / need and what are they for?

(40 Posts)
principalitygirl Wed 16-Oct-13 12:17:26

DH and I have over £100k in savings, all in ISAs and standard savings accounts. About £30k is a recent redundancy payment one of us got but the rest is what we've saved. We have a mortgage of around £160k on a 3 bed semi that cost £230k a year ago. We have no other debts. Our joint income (gross) is currently around £60k.

We've always been very careful with money and wary of debt. I don't feel comfortable not having a decent savings cushion and always hesitate before spending out. The two properties we've bought with mortgages during our time together have always been at the cheaper end of what we could afford, both in our view and the view of the mortgage lender.

BUT, I do wonder what we're saving for, other than a rainy day, our next house move (hopefully within the next 5 years max and to our forever house) and DS's future, and whether we'd be better off paying off a chunk of the mortgage?

Does anyone know how much a session with a financial adviser costs and whether it'd be worth it for us to maybe get some advice on how to best use what we've got saved etc?

Thanks!

titchy Wed 16-Oct-13 12:27:33

Lucky you. Is this a show-off thread? hmm

AndyMurraysBalls Wed 16-Oct-13 12:30:15

You've got all that wonga and not paid off some mortgage? Wow.

What interest rate are you getting on your savings and what rate are you paying on the mortgage?

eurochick Wed 16-Oct-13 12:31:39

We have a fairly hefty amount (approaching our combined gross salaries between us). Most of it will go into our next house purchase.

It probably would be worth overpaying your mortgage. Or chucking some into pensions if you can.

Pootles2010 Wed 16-Oct-13 12:32:38

Agree with Andy, you're absolutely mad if you don't pay some of your mortgage off.

ZippityDoodahday Wed 16-Oct-13 12:34:50

Show off. Maybe you're saving to donate to Cancer Research UK or Save the Children? After all it would seem you have more money than you know what to do with.

Ragwort Wed 16-Oct-13 12:40:49

Yes, I think you should see a financial advisor, they should not charge you anything but obviously will get a commission if you take up any of their suggestions.

We have reasonable savings (but not in your league wink) but we have cleared off our mortgage. We have a 'safety net' to rely on (self-employed so income very erratic) and we were able to use some for private medical care recently rather than wait for the NHS.

At our stage in life most of our's is for our pension and hopefully something for DS for university/first home deposit. We will also down-size within the next 5-10 years.

snakeweave Wed 16-Oct-13 12:44:15

blimey! go on money saving expert (they would deffo advise you to pay off some of the mortgage).
our "safety savings" are what we would need to live on for 6 months if we lost our income. about 7K. wish we could save more but it's not practical at the moment.

debtcamel Wed 16-Oct-13 12:49:54

Do you have good pension arrangements apart from the savings that you have?

If yes, then I would probably use half of your savings to reduce your mortgage. It will be one of the best days of your life when the mortgage is gone and the whole house is your smile And the rest of the savings I would move 50% into a UK equity tracker fund and keep 25% in cash.

If you don't have good pension arrangements, I would be treating the ISAs as my pension. So I would probaly pay 25% off the mortgage, and put 50% into tracker funds, some UK, some European, some US and keep 25% in cash.

IMO Financial Advicers are usually rich and their clients aren't for a very good reason sad They don't tend to recommend trackers or ETFs because they get very little commision from them.

peggyundercrackers Wed 16-Oct-13 12:58:04

we have about 8 years joint salary as savings held in various ways. we have a smallish mortgage (70% equity in 400k house) but its covered easily - we dont pay it off as we get more for some of our savings in interest than we do on our mortgage, mortgage is only 2.4%. we keep the money as a cushion - if either of us was made redundant we wouldnt have to worry about the mortgage, we are going to use some of it for school fees when the time comes - we dont think about it as money in the bank tbh, we just kind of ignore it as its not in a current account so you sont see the number on a monthyl basis and carry on as normal.

we spoke to 2 financial advisers and all they really wanted to do was sell us insurance in case i popped my clogs - i didnt really find it beneficial to speak to them.

CogitoErgoSometimes Wed 16-Oct-13 13:57:23

I have a few months salary in easy-access savings (ISA), a chunk in some long-term shares and another chunk in a few investment funds. The last two are about to be cashed in to pay for a big home improvement project but I'll keep the ISA as a 'rainy day' fund.

£100k doing nothing sounds like a big wasted opportunity. If the interest on your mortgage was higher than the interest on your savings they'd be costing you money.

NancyShrew Wed 16-Oct-13 18:11:47

Stealth boast much?

You are literally pouring money down the drain by holding onto capital as savings and thus incurring high interest charges on your mortgage. The interest charge on your mortgage will be much higher than any interest you will receive on your savings. You do not need 100k for emergencies or a rainy day fund.

It amazes me how ignorant some people can be when it comes to money. If I were you the first thing I'd do is use some of it to book yourself on a course to study basic principles of household finances.

HTH

Doingthestats Thu 17-Oct-13 08:32:57

Debtcamel has given sage advice on spreading assets. I agree about pension provision as well.

I have never been to a financial adviser in my life but both DH and I have invested etc in low to moderate risk stuff and it is something we are confident in.

I have a mortgage and also a lot of savings however due to having a .5% tracker mortgage it is currently worth us keeping a mortgage and keeping our money in ISA's and tracker funds. The point of tracker funds are they are a long term investment.

We did overpay our mortgage without penalty, what are the terms on your mortgage overpayments?

When rates rise we will pay off our outstanding mortgage balance but currently we make more keeping our money in savings.

Chigley1 Thu 17-Oct-13 08:37:57

Nothing. Nor do we have any ISAs pensions or any type of fund for anything. We're self employed so shall work until we drop probably.

specialsubject Thu 17-Oct-13 22:35:00

only here would you get all this childish, jealous abuse for your hard work and prudence.

ignoring those that belong in the playground, the point about your money being destroyed by inflation is entirely valid. I think you need:

accessible savings for six months of living costs
life insurance and arrangements for your son if one or both of you are dead/disabled
some kind of pension

then look at mortgage rates versus savings rates. Savers are dirt to this government and will be for years. So unless your money is in older accounts that pay above inflation, do think about paying off some of the mortgage. IF the early redemption costs aren't too high.

suebfg Thu 17-Oct-13 22:45:44

Ignore the sarcastic comments about stealth boasting ...

An independent financial advisor will cost you approx £200 an hour or you will pay commission on products they sell. However, for free, (and I'm not a financial advisor), I can advise you that if you are paying more for interest on your mortgage payments than you are gaining on your savings, then you should pay more off your mortgage. However, you will know what 'cushion' of savings you need. Ensure this 'cushion' is in cash ISAs and easily accessible and always hunt around for the best rate - it is a hassle but that's the only way I'm afraid.

Of course, you need to think about your future too so pension planning is important. Personally, I've always taken the view that paying off my mortgage is my priority so I have nil mortgage on a big house (stealth boast [hmmm] but at least I know that my money is working for me - which can be difficult to tell with pensions. But now, my focus is on planning for retirement so I'm investing in a mix of stakeholder pensions, stocks and shares ISAs and saving certificates.

Sleepyhoglet Thu 17-Oct-13 23:23:36

Seems an awful lot of savings. I probably have equivalent to you but arranged differently. For example only have 30k left of mortgage to pay off but 150k equity and about 30k in savings. We both have pensions as well. I prefer to have slightly less saving but more equity in the house. I think you have done well, but need to reappear range the finances slightly.

Mrspebble Thu 17-Oct-13 23:33:06

I would overpay on the mortgage but leave aside money for your son, car etc

justwondering72 Fri 18-Oct-13 06:02:55

On the subject of financial advisers, tbh I would suggest that you get yourselves educated more about financial matters instead. The Motley Fool website is a good place to start, both the articles and the boards.

Fwiw I'd agree that, unless your savings are in some particularly high interest gaining form, paying off a big chunk of the mortgage makes sense.

We overpay the mortgage by about an extra third each month, so if we needed to we could take a 6-month payment holiday, or if things continue well, we'll have the mortgage paid off in time for our eldest going to University.
The DCs have tracker funds and high interest notice accounts.
We have a savings account and a share account, about 6 months' income equivalent, for emergencies.
We have always taken a prudent approach to finances, and usually save up for big purchases (such as our car) rather than forking out for finance.
Work out what you need to live on, anticipate upcoming expenditure, find out how much you can overpay the mortgage without penalty and do that.

SilverViking Fri 18-Oct-13 13:31:51

We paid of our mortgage after we came of the low special rate. It has been brilliant in helping to save, as the first of 4 children started university this year. Our savings are less than yours, but we have a couple of investments maturing over the next coulee of years, which should build up the pot for potentially 4 DC going thru university, plus potentially 4 weddings, and something to retire on left after that!

SilverViking Fri 18-Oct-13 13:33:47

Should have said, because savings rate is so low, currently looking at possible buy to let as a future investment.

Littleredsquirrel Thu 24-Oct-13 10:16:15

Don't touch your ISAs but check the rate on your standard savings accounts because they are likely to be low rates and you are taxed on the interest. I agree with the others, pay off a chunk of your mortgage. It makes far greater sense financially and you have a mortgage of 2.6 times joint gross income which isn't low.

As a starting point pay off the £30k you've just gained in redundancy. That was money you didn't have until a short while ago and so you won't miss it in your savings pot but it will make a big difference to your mortgage debt.

Remember - A MORTGAGE IS A DEBT!!!!! You have a mortgage of £160k and £100k put aside. In real terms you do not have "savings" of £100k, you have a net debt of £60k!!!

MadeOfStarDust Thu 24-Oct-13 10:32:24

We have paid off our mortgage recently - feels good ... BUT only pay off the mortgage if the interest is higher than you are getting.....

Our mortgage rate was tracker at 0.86% - we got 4.2% in a 5 year savings account with Nationwide.... Once the 5 years was up we paid off the mortgage with the money.

It is not always the case that you pay more on a mortgage...

Littleredsquirrel Thu 24-Oct-13 13:10:34

But do factor in inflation when looking at savings rates.

Littleredsquirrel Thu 24-Oct-13 13:17:50

In answer to your initial question we have savings equivalent to about six months salary in ISAs. Its a buffer just in case things go horribly wrong somehow. This time last year we thought we might need it since I left my job to be self employed and it was a comfort to have it there. If things don't go horribly wrong well then its part of our "pension".

But all our excess money goes on overpaying on the mortgage. Its amazing the difference overpaying makes and when that debt is gone, hopefully in about six years time, then we will have more money each month to save.

ouryve Thu 24-Oct-13 13:19:20

Savings interest is so crap, even tax free, that paying a chunk off the mortgage saves more, in the long run. Ours was tiny, to start with but we've cleared it now.

Littleredsquirrel Thu 24-Oct-13 13:20:51

www.moneysavingexpert.com/mortgages/savings-vs-mortgage-calculator

This tells you whether you're better off paying off your mortgage or sticking with your savings rate (but then remember inflation).

Squitten Fri 25-Oct-13 16:27:26

Our joint/savings account holds a certain amount before it stops paying really good interest. When we reach that limit, once a year or two years, we split it in half and pay off a chunk of mortgage. This means we keep half for the eventuality of exploding boilers/leaky roof/DH's business folding.

Hoping to clear the mortgage asap!

killpeppa Fri 25-Oct-13 16:28:51

I got bugger all & have just separated so this thread is real ego boost-

not

Netguru Fri 25-Oct-13 16:37:26

I really get your post. We were in the same position six months ago and I really wondered what we were saving for. Financial security is nice but you only live once etc.

Our mortgage is 0.79 per cent so not worth paying off despite all the cries on here that this is a 'no brainer'

We then bought our forever house. We kept 48k in ISA savings and spent the rest. The bills doing up the new house will take care of any propensity to over save for a while.

Icepilot Sat 26-Oct-13 17:48:43

Why is it never ok to post on money matters about matters involving having money? OP is not on credit crunch or AIBU. She's not taking money from any of the posters.

Fwiw I have fuck all, but would overpay the mortgage and free myself from that (and working) ASAP.

emma16 Sat 26-Oct-13 22:15:25

It seems to be, like others have pointed out, on here people really love to help when people are down, but have a bit of money & everything be ok for you woah you big show off!! Well done to you for having that amount of savings because i can't imagine ever saving that much up.
However yes there is a lot more you could be doing with it, either pay some off your mortgage each year (normally 10% of what you owe) until you re-do your mortgage agreement & you could then pay as much as you like off.
Some buy to let's is always a good idea. We got £16k when my husbands mum passed away & we used £13k of it to put a deposit down on a 3bed small terrace house & that mortgage now pays itself by the tenants in it.
We get a profit of £100 a month but we put that into an ISA to build up as obviously the house will need repairs/new boiler, tiling etc at times & we didn't enter into it to make a profit as such now. We plan to move to a home to see us to our last days in around 10-15 years time, hopefully buy then we'll have at least one more buy to let, perhaps two more, and these will hopefully (!) provide the chunk of money we'll need to buy the bigger home & all we've paid towards it was the initial £16k as such. Or it'll help our kids with their first houses etc.
But yes, definately do something with it as it could do so much more for you!!! Good luck

suebfg Sun 27-Oct-13 16:23:21

Erm ... maybe stick to posts that boost your ego then killpeppa?

principalitygirl Mon 28-Oct-13 16:20:29

Sorry for late reply - we've been ill.

Not a show off thread, I guarantee you, nor a stealth boast.

Thank you for the helpful comments suebfg, debtcamel, doingthestats, littleredsquirrel, specialsubject and many others.

littleredsquirrel - the £30k in redundancy didn't feel like a gain as I was made redundant while pregnant and the package included mat pay I was legally entitled to. I got another job a year or so after baby was born but it pays much less so I still think of the £30k as sort of subsidising my much lower current income.

I also only get a rubbish pension in my new job and a lot less benefits all round. DH does have a good pension package (still final salary for now) and decent life cover too. We took out an extra policy for me when we renewed the mortgage.

snakeweave, I will register on MoneySavingsExpert and post there too - good point.

justwondering, I've not heard of Motley Fool - will look it up, thanks.

Paying off a chunk of our mortgage seems to be the consensus. I'll look into that. I think we can overpay a percentage each year with no penalty or reduce the term. Advantages / disadvantages to each option?

Nancyshrew, I also know many people who are ignorant about money i.e. after years of working in the same job as me they moan about high rents and not being able to afford a deposit on a mortgage but seem to overlook the money they fritter away on extravagant and designer items and nightly trips to bars and restaurants smile Aside from my house, the most expensive thing I've ever bought is a 2nd hand car for £4k and my wedding dress is the most expensive clothing item I've ever bought and I got that in a half price sale for £500. People I know, some of whom have earned less than my previously-slightly-above average salary think nothing of spending £200+ on a handbag or dress for a wedding and yet wonder why they have no savings.

I got raised by parents that don't do debt but they also never had much money so had little knowledge of how to manage it - beyond making sure bills were paid - to pass on. Savings and investments - beyond the little terraced house they own - are something they know nothing about. They were truly horrified by my £10k student loan debt that I left uni with, despite that being the norm, at a v low interest rate and paid off within five years without me really noticing as repayments were deducted at source.

zippity - FYI we made regular, modest monthly donations to a number of charities. My £100k in savings (held jointly with DH and accrued over a decade in full time employment) wouldn't even cover the salary of a Chief Executive of some of the larger ones though. And to a City trader it'd be a nice quarterly bonus. Kinda puts it in perspective.

CogitoErgoSometimes Mon 28-Oct-13 16:45:27

The advantage of overpaying the mortgage by the penalty-free amount is that you save a huge amount of interest each time. Paying off 10% can cut a whole year off the end date. There are online mortgage calculators that can illustrate. Savings are making 2% or so and most mortgages are at a higher rate so the maths works as well. The main disadvantage, if you ignore early repayment charges, is that the only way you see that money again is either to sell up or remortgage. So keep back a sensible amount of easy access cash (ISA) in case you need a few thousand in a hurry.

principalitygirl Mon 28-Oct-13 17:54:21

Ooops - only just seen the second page of replies! smile

Netguru - yours sounds like a good solution.

littleredsquirrel - thanks for your advice and the link.

emma16 - buy-to-let scares me. I wish it didn't - I'd be a decent landlord - but it does!

We have our savings offset against our mortgage ( redulting in lower rate).

As long as mortgages are cheap, there is no need to pay it all off. Maybe just check with your bank.

If is good to have some readily accessible cash for emergencies (6 months living expenses), if you can afford it ( you can ).

Eg, DH lost his job unexpectedly and is now retraining, we will be living of my salary ( part time) and savings.

LadyLapsang Mon 28-Oct-13 22:46:50

Considerable savings and very small offset mortgage - keeping the mortgage in part so we have cash flow in case we would like to help DS buy a place. Save out of habit, because we grew used to living on a smaller income but now school fee days are over saving because we may need to supplement our final salary pension schemes, help parents with care costs etc. etc.

Squeakygate Tue 29-Oct-13 19:58:27

We have a much smaller amount of savings than you op. Mainly easily accessible.
I tried to persuade dh to look at a buy to let but he said not yet (we have very young children and I'm now a sahm)
We found out dh is being made redundant quite soon so having the easily accessible funds will help if he can't find anything soon.
When I worked we used my earnings ( small) to overpay on the mortgage, it made a big difference to us and I'm hoping will tide us over if needed.

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