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

[principalitygirl]

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!

Lucky you. Is this a show-off thread?

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?

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.

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

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.

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 ) 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.

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.

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 :) 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 :( They don't tend to recommend trackers or ETFs because they get very little commision from them.

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.

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.

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

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.

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.

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.

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.

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

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.

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!

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

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!!!

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...

But do factor in inflation when looking at savings rates.

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.