What to do with spare cash- any advice?

[WillbeanChariot]

Hi all,

Just after a bit of sensible advice on what to do with spare cash as DH and I bicker endlessly cannot agree about it.

DH works full time and is a higher rate taxpayer. I work part time and am a basic rate taxpayer. We have one child. Our mortgage is variable, currently 2.5% and we can overpay and if necessary withdraw overpayments. I have student loans that I can defer because I don't earn enough but we have no other debts. DH has a pension, I don't.

So, what should we do if we have a bit to spare? Overpay on the mortgage? Open a child savings account? Open an adult savings account? Get an ISA? We have overpaid on the mortgage so far but I reckon we should think about some other savings. What do the good people of mumsnet think?

Send it to me

I'm sure someone more helpful will show up soon, just jealous of your predicament.

The best financial advice I've seen on Mumsnet recently is this:

Don't take financial advice from Mumsnet.

invest it in some fine art

Have 3 months salary saved in ISAs Mortgage overpay anything else.

Personally I'd clear the student debt just so I could erase it from my mind.
Financially, smartest move is to clear the mortgage and/or set up a pension for yourself. Are you up to date with your NI contributions? They are a good value for money state pension.

You could convert you & your DH into a limited company (you need an accountant's help for this) and take better advantage of your tax band differential (might get him out of the higher tax payer bracket).

An accountant could advise.

Ok serious yet entertaining suggestion: at the risk of outing myself, I sold a fine musical instrument recently for £7k. I paid £3.8k for it ten years ago. This is average increase, nothing unusual.

Buy a star undergraduate at one of the royal music colleges an instrument for under £10k and you stand a good chance of doubling your money - string instruments never decrease on value, especially if you buy new like I did.

I know a guy who persuaded an Anerican investor to buy him a £10k double bass when an undergrad, he signed a deal that it would be sold when he graduated. The instrument only increases in value when played regularly.

here endeth iTigress' ridiculous investment advice. I suspect purpleturtle had it right.

That is very interesting. How is the insurance? I have an amount to invest, never though of instruments. What risk is there?

I'm a musician who has been pleasantly surprised, not an investor! I think someone's definitely missing a trick though. Insurance is through a specialist insurer like the Allianz musical instruments one, but you'd be justified in asking the student to pay that anyway as they'd be so delighted at having a wonderful instrument to play.

I think you need a pension, so I'd do that :)

Well i'd love a musician to persuade me. Very interesting. Googled it a bit. Looks like a good idea..

Keep a 'cushion' of easy access cash... say 6 months' outgoings... in an instant access ISA. This will cover for emergencies and/or big ticket purchases. Look at long-term investments next e.g. regular contributions to pensions and child trust fund/uni fees account - get those started. Then it comes down to interest rates. If you're paying more interest on your mortgage than you can get in savings it makes sense to overpay the mortgage (or reduce the term on a more permanent basis). However, if you find a savings plan that pays more than 2.5% it makes sense to put your money there and not overpay the mortgage.

Thanks all. We can take out overpaymenst from our mortgage, so that is our slush fund. I think we should start a long term investment for uni fees etc, but DH is concerned that if our mortgage interest goes up we won't be able to access the saved cash in order to pay more. I am concerned that in 17 years we'll still have a mortgage and (hopefully) a child going to uni which will cost who knows what by then. I am not complaining though, we are lucky to even have money to discuss.

Interest rates are unlikely to go up for the foreseeable future and 2.5% is a very low mortgage rate. If you could set aside some money in an account paying that interest or more... there are some reasonable 2.8% offers on Cash ISAs at the moment... you could use it to pay off a lump sum from the capital after 12 months or, if mortgage rates stay low, you could transfer some of it into longer-term savings.

Here in the US the advice is first always have at least 3 - 6 months worth of salary put away. Then save for retirement and college for the kids.

3-6months salary in hand. Pay down the mortgage as your DH is a higher rate tax payer and would need to earn at least 4% elsewhere to match that. Now is the perfect time to be doing so with tue interest payment element being so low.

You can get instant access ISAs for more than 2.5% at the moment so I would use your full ISA allowance first for both of you (£10,200 combined) and then overpay the mortgage if there's any left after that. If the mortgage rate goes up in the future you will be able to access the money and use it for an overpayment then.

I am a qualified financial advisor, and I am telling you to make an appointment with an INDEPENDANT financial advisor in your area. Go on recommendation. Believe me they are worth their salt and they will get your priorities straight.

Do not go with any hair brained idea's. Think about whether you can afford to save that money in a long term investment or whether you will need to keep some back in case one of you gets made redundant (I did 5 times in 5 years) or other unthinkable events.

Me xx