Savings beginner

[MomOfBoyz2]

Hi.. we've recently paid off all but one debt. It's around £3000 so that will be gone soon enough too.
We'll have around £900 left each month after all outgoings so wondering what would be best in terms of saving it and where.
We have a savings pot of £1000 so we were just going to add to that.
Would like to get some advice from a professional but also ask here while I'm up early
Thank you

I have a mixture of savings.

An account that we stuff money in for all the things that come once a year like car tax, car service/tyres/mot, boiler service, Amazon prime etc. We worked out what the yearly bill was, split it in 12 and then added a bit extra for things like new washer etc which means expected and unexpected big bills come out of that account.

We then have savings that are immediate and could be accessed if one of us lost our jobs etc

Then savings for anything we want to spend or save for which includes holidays.

After that it's long term savings like pensions etc.

In summary we split our monthly savings between many accounts which helps distinguish what they are for.

What stuffing says, more than 1 pot of money, savings for short term your £1000 will probably cover annual known bills depending on number of cars and age for repairs, you need to sit down and work out the actual sum needed. Then emergency fund for lost job normally 3 months living expenses but 6 months if you are in more insecure jobs or self employed, in a third potihave annual things like birthdays, Christmas days out holidays, then you need the 4th long term for house deposit, pension, investments etc.

Most people with serious savings, pay themselves first, so instead of saving what's left at the end of month they move money to the various saving accounts as soon as paid just like it was another bill . I think psychologically you are less likely to move money make to current account for non essential spending if already in your savings account than if it is in your current account and available.

Unfortunately interest rates are absolutely rubbish at the moment and have been now for a while. Even locking money away for say 5 years will only give around 2%. We have savings in cash ISAs, savings bonds and premium bonds which obviously is down to luck if you win, but we’ve so far won more than we would from money sitting in a savings account.

I’d say if you have a mortgage and spare £900 each month, to over pay it by £400 a month and save the rest.

Well done on paying off debt and having £1000 in savings.

I would call that £1000 a starter emergency fund and I would have it accessible, so in a current account, or linked savings pot.

Next I would build that emergency fund up to be 3-6 months of expenses, 3 months if income is really stable, otherwise aim for 6 months. If you want to set yourself little goals, list out all your typical expenses, then multiply each by 6 (if doing 6 months) and then work though your list, putting that amount of money in to your emergency fund, as though it is a list of goals to achieve.

NS&I is a popular place to put a big emergency fund, such as their Premium Bonds product. No interest, but a change of winning a monthly draw. It can take a few days to access money.

After you have got 3-6 months of expenses in an emergency fund, then I would progress to using a Stocks & Shares ISA, Pension, SIPP for investing. These tax wrappers have different qualities to them, most people need two... ISA and Pension.

Professional advice you probably don't need at this stage, unless you are a year or two from retirement.

There are books, audiobooks, YouTube videos, podcasts, and online courses which can be of help.

A few to get you going (all UK based):
Meaningful Money (podcast, YouTube, book, audiobook)
Money to the Masses (podcast, YouTube)
In Her Financial Shoes (podcast, book)
Mrs Mummypenny (book, podcast)

You don't need to pay anyone, you just need to do a bit of reading.

You need some accessible money and should consider keeping a portion flexible for large purchases like car replacement, home improvements, moving house etc. Or maybe 50/50 saving and investing if you don't have any specific plans for large purchases in the next couple of years.

Unless your mortgage rate is under about 1%, look into overpaying.

Also consider investing in an ISA or topping up your pensions, but here you need to be aware of fluctuations in the market, ie investments should beat cash over time, but you want to avoid having to withdraw money when the market is down, because this is when you lose money. For pensions, you get tax relief, but the money is locked away until you're 55/57 depending on your age.

Useful resources:

www.moneysavingexpert.com/savings/which-saving-account/

ukpersonal.finance/flowchart/

There's also meaningfulmoney.tv but that seems to be offline at the moment, but it is excellent, with a podcast, lots of guides and youtube videos.

Savings... pay yourself first. So payday sees money go out to outgoings but also your PERSONAL savings account. Not shared.

Plenty to think about thank you
I'm mid forties so not retiring any time soon!
Will have a read up, need to get my head around it all