Sensible way to save

[JohnnyMcGrathSaysFuckOff]

Hi, we have 3 small DC (6, 3, 3) - the 3yos are just about to get their nursery funding so we will suddenly have loadsamoney, by which I mean c. £400 over expenditure each month.

I am currently planning to divvy it like this -
3 x 40 put away in each child's long term savings bond
100 in our long term savings/ pension acct, which is just an ordinary savings acct with rubbish interest
150 in short term savings for projects on the house
100 overpayment of mortgage

I am sure this is unimaginative and probably not getting great returns - WWYD with this situation?

6 months emergency money

Pay off any debt

Proper pension

Over pay mortgage

Some people would advise ISA

Children's savings sometimes pay better rates than adult savings

Look at money saving expert website

Build up a rainy day fund.
Pay off debt
Overpay mortgage

Children’s saving bonds are nice to have but not at the expense of family rainy day money.

Definitely get a proper pension if you don’t already have one through work

Forget saving for the kids. If you save for yourself, you can give them money from your savings when you want to / need to.

Agree with PPs - first priority is emergency funds, 6 months basic expenditure covered.

Forget projects on the house until that is done.

Don’t mentally think of a savings account as a pension - make decisions about a real pension. You’re potentially missing out on tax relief.

The pension vs mortgage depends on what tax rate you pay and what your mortgage interest rate is.

I personally wouldn’t overpay the mortgage.

Once emergency fund in place, I’d go £300 pension and £100 house projects fund. I’d jiggle that year to year depending on how important the house projects were.

I don't advise putting money in children's names as it ties it up, think it is better to save generally and distribute later. I know I am being negative but if you put money into an account in their name, and they have any issues, it can create problems.

I like that attitude, save generally, distribute later.

You never know how the future will go.
There is no point committing money for your children's future if you lose your family home before they are adults. Once your own financial future is secured you can look to saving for your children.

Thanks for this!

I do have a pension as well as long term savings. The pension has the possibility of making AVCs too, so thinking about that.

The children's savings accounts already exist and are "smart" accts which they cannot access without our say-so.

The house projects are urgent ish because bits of it are crumbling! We have not had money to update the house for years and the bathroom is falling apart, some rooms have blown plaster etc. I try hard to keep it clean but it never really looks nice because of that.

Re your last post and crumbling bathroom. Definitely don't be tying money up in children's savings accounts if your house needs work. Invest in maintenance and improvement and your children will benefit that way in the longer term.

I'm not sure if you already know for definite how much money you will save on nursery funding, but just to warn you it's never as much as you think it's going to be.

But I would definitely get the house sorted first - you have to make the best of your home before saving for kids.

Why don't you start a stakeholder pension for your children? Pop £20 each away per month, it gets topped up to £25 and they can't access it until they are 55.

Then:
emergency fund
Mortgage overpayments
home improvements

Money spent on mortgage overpayments has so many perks and it protects you from harsh times too.

Those who had overpaid their mortgage before the pandemic and then had to take a payment holiday will be in a far better position than anyone who had NOT overpaid their mortgage and had to take a payment holiday.