Savings advice

[AlwaysHungry2]

Hi everyone,

This is my first post on Mumsnet and I am looking for some help with my savings.

Stuff about me:

• I am a 21 y/o that works part-time and lives with parents so I try to save around £450 (Will go slightly under to account for any impulse buys in town, meals out, birthdays etc..).


• I am £485 deep into my overdraft at the minute. I know I can allocate the full £450 to this but choose not to because it's at 0% for now and means I will have nothing else left to save.


• I currently only have my emergency fund which is nearly at £6k - roughly 6x my monthly salary once emergency tax has been deducted. I dip into this same fund to cover the impulse buys and everything else mentioned above.

Please can someone answer the following questions if you don't mind?:

1. I am opening up a holiday and car fund later on today, would you suggest opening up a savings for anything else? Also, how much of the £450 do you think I should allocate to these?

2. Should I continue to contribute to my emergency fund or is £6k enough? I have a goal of 10k set on my banking app incase but maybe that's a little OTT

3. I don't have very much in my pension (less than £100) because I didn't opt in but now I have and I've increased my contribution to the max (5%). Do you think it's worth opening up an ISA to make up for no contributions or will it not make much difference as I'm quite young?

4. I was placed on an emergency tax code late last financial year so only looking to get £125 back this year. I will also get some more back next financial year, what would you recommend I do with this? Straight to my emergency or split it up between different pots?

If anyone has some advice on how you would allocate my £450 remaining, please share! Any general advice I am willing to take on board so please reply to my thread.

Thank you 😁

If I were your age again and in your position this is what I would do.

Get rid of the overdraft and try to establish why you have strayed into it (unless you already know)

Get a grip on impulse buying. Chances are you don't need it and don't even really want it.

Emergency funds are usually 3 times your monthly salary so you are OK there.

I have always viewed cars as just a tool to get me from A to B. I have always bought the cheapest reliable car I can find (pot luck sometimes, I know). I would never entertain getting a car on PCP.

Open your own SIPP and whatever you drop in there, you will get 20% tax relief on it. Free dosh. Set up a regular standing order every month.

Open a S&S ISA with some of your emergency fund and set up a regular standing order every month.

I know people of your age are under pressure from social media re showing off your lifestyle. Try to remember it's just a front. In my day it used to be called 'keeping up with the Joneses'

Try to save up for larger purchases and buy outright. Try to stay away from debt.

Have a read of this

theescapeartist.me/

That website talks good sense and I wish there had been such a resource available when I was your age.

Good luck.

Open a LISA to save for a house purchase, the government puts in 25% of your contributions up to £4,000. So if you save £4,000 a year you’ll get £1,000 a year from the government. This isn’t good for emergency savings though as there’s a penalty for withdrawing money except for for a house purchase or retirement.

Next, can you increase your earnings? Any reason you are only working part time?

And finally - I’m assuming your emergency savings are in an unlimited withdrawal pot? The average 21 year old living securely with parents is not going to get a £6k emergency. Split some of it into fixed accounts you can’t access for say a year. You’ll get higher interest. Clear the overdraft with the emergency savings.

You might want to start thinking about building up a credit score too - download an app like ClearScore and make an account. It sounds odd but you have to get credit to gain credit so you can see what credit cards you’d be eligible for to get building.

Have you heard of the Ramsey Baby Steps? www.ramseysolutions.com/dave-ramsey-7-baby-steps

Overdraft - that is part of Baby Step 0, getting current. So I would focus on paying that off. You may well have a good deal at the moment from your bank but that may not last. If you paid £100 a month to it, you would be free of that within 5 months - so several months before Christmas. You can then put that £100 a month towards a Christmas sinking fund.

I am opening up a holiday and car fund later on today, would you suggest opening up a savings for anything else?

Christmas, see above. Car fund - what would that include: cost of a car, insurance, tax, MOT, ongoing maintenance.

Birthdays - you can probably cash flow those every month but you might want to have a small pot of money for birthday presents, cards etc.

Should I continue to contribute to my emergency fund or is £6k enough?
It depends on your circumstances. Are you spending £1k a month on essentials such as rent, heat/light/water, internet/phone, travel, food, clothing? If so then £6k sounds about right.

I don't have very much in my pension (less than £100) because I didn't opt in but now I have and I've increased my contribution to the max (5%).

Great. 5% won't be the max, the most you can pay in to your pension each year and get tax relief on that, is equal to your 0.8 x gross salary, or £32,000 (£40,000 gross) whichever is lower. Minus what the employer pays in.

Putting something in pension is a great idea. If you put in 5% and your employer puts in 5% then that's fantastic. Do at least enough to get whatever your employer contributes. If you want a percentage to aim for, then 15% is a good figure... but some can go to LISA.

Do you think it's worth opening up an ISA

Yes, but is buying a home likely in the next 10 years? A Lifetime ISA is something to look at, you can put up to £4k in each financial year. It can be used towards a first home deposit, up to £450,000 value (I think, look up the figure, plus it may change in future).

If a home purchase is likely in under 5 years time, use a CASH Lifetime ISA. Otherwise a Stocks & Shares Lifetime ISA.

Try to keep focus... so if you get extra money such as from a tax refund, put it towards your primary focus area. Initially that may be repaying debt, then topping up emergency fund, then topping up a sinking fund.

Do you like YouTube, or Podcasts, or Audiobooks, or all three? Are you listening to and/or watching financial channels such as:
Meaningful Money, Money To The Masses, In Her Financial Shoes, MamaFurFur, That Mint Podcast, The Art of Money Saving, ChooseFI
Use whatever medium you like to get as much information from as many sources as possible, so you learn about how pensions and investments work.

Thanks for your messages, links and channel recommendations everyone, much appreciated!

Someone asked if I will be increasing my earnings, yes I will be working full-time again this summer and will stay full-time.

Regarding the pension, I meant I pay 5% so my employer can match me. I was looking at SIPPs and S&S ISAs last night, is it better to open these through a bank or a platform like Vanguard instead? The only problem I have with S&S ISAs and SIPPS is choosing where to invest the money, please can someone let me know as to what I should be looking for or direct me elsewhere?

When you suggest to stay away from debt, does this include credit card? Someone mentioned getting one above but I don't think I am in a good position yet with my overdraft

If you’re careful and can control your spending you can get a credit card without going in debt. Get one with a small limit, and spending a small amount on it each month and pay it off in full by direct debit so there’s no chance of forgetting a payment.

If for any reason you don’t feel you can trust yourself with a credit card, then it’s definitely not worth the risk. Do what works best for you - there’s other ways to start building a credit score

I was looking at SIPPs and S&S ISAs last night, is it better to open these through a bank or a platform like Vanguard instead?

Vanguard is the lowest cost platform for a SIPP and S&S ISA when first starting out. At 0.15% plus fund fee, it is often cheaper than a workplace pension.
When the amount invested gets higher, around £100k, then other platforms become cheaper, such as Interactive Investor.
Vanguard is cheap because they only offer their own funds, so the fund choice is not as great as using a provider like AJ Bell or Hargreaves Lansdown.
AJ Bell has a new platform which is competing with Vanguard, called Dodl and is mobile app based. Not sure what account types they are currently offering but I think they have ISA and Lifetime ISA.

The only problem I have with S&S ISAs and SIPPS is choosing where to invest the money, please can someone let me know as to what I should be looking

Globally. You want a simple fund which invests as globally as possible. So you buy a unit in the fund and the fund buys 6000+ shares in companies throughout the world.

Some examples:
Vanguard FTSE Global All Cap - www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc/portfolio-data
Vanguard LifeStrategy 100% Equity - (This is heavy weighted to UK, at over 25% in UK) see: www.trustnet.com/factsheets/o/acdv/vanguard-lifestrategy-100-equity
AJ Bell Responsible Growth (another UK weighted fund, at over 22% in UK) see: www.ajbell.co.uk/sites/ajbell.co.uk/files/AJB_VTAJBell_Global_Growth_factsheet.pdf
HSBC MSCI World - www.fidelity.co.uk/factsheet-data/factsheet/IE00B4X9L533-hsbc-etfs-plc/portfolio

Listen to podcasts about investing.
Interviews with JL Collins are good, such as this one: meaningfulmoney.tv/2020/01/15/the-simple-path-to-wealth-with-jl-collins/

Going to go slightly against the grain regarding a SIPP. Definitely stay enrolled in your workplace pension, but at your age I would consider saving for a house to be more worthy long term than pouring loads extra into a separate pension. Your decision to make, based on your circumstances though of course.

I have a Christmas and birthdays savings account, for me this works well as I have 3 kids and lots of people I buy for. I put in £250 a month and then when it’s a birthday I transfer that money over. Just means I don’t have to pay for it all out of a few months salary.

I see your point about saving for a house with a Lifetime ISA but I don't think it's the best option for me. My parents have expressed that it will be written in their will to be split equally between all children. I don't think I will qualify for the government top up but I could be wrong?

I reckon a S&S isa could be used here instead then?

What will be split between the children?
Do they have a serious illness so you know they will die soon? My parents are in their late 70's, still going strong. I would not be counting on an inheritance.

Never rely on an inheritance OP. Unless you have a viable reason to believe they are about to pass away imminently then you have no idea of, when, and how much you will inherit.

They can change their mind, need it for care costs, and/or be around for a very long time still.

The only requirements for the LISA is obviously the withdrawal penalty, you have to be a first time buyer, age (you meet both requirements) and property price. I can’t quite remember how much it is but you have to use it on a property below a certain amount, but that amount was very generous for a first time buyer.

It might make more sense to do it the other way round. Save for a house now and then if you receive an inheritance you can always put that towards a pension. I personally just don’t think high pension contributions need to be a priority for a 21 year old on a low salary living at home without much savings towards a house deposit.

Op read up on Lisa rules. Moneysavingexpert has great advice.

They chart Lisa against pensions and sipps.

If you find yourself out of work at any time, you won't be able to claim benefits (if Lisa above certain level) and must use your Lisa first.

Lisa is not ring fenced by the government in the same way that pension saving is.

Ie if you are out of work and have pensions, you can claim benefits and the pension savings are not affected.

It may mean nothing but its something to think about.

Hi everyone,

Thanks for your advice. I’ve used some of my savings to pay off the overdraft and have opened a LISA.

I wanted to ask, do you think it’s worth me getting a credit card once I go back to working full time? Just asking as I’ve received an email about one from my bank

As far as little day to day things you can do that help save the pennies I would suggest some of these:

• Have 1 or 2 no spend days a week (i.e. no coffees, minimise travel costs etc)


• Download a discount code browser extension like cheapskate: https//cheapskate.io/ it instantly applies discounts to your shopping basket when you're shopping online


• Follow martin lewis (money saving expert) for money saving tips!


• Banks like Monzo, Starling etc also have a 'round up' feature that round up each transaction you make to the nearest £1 and put the pennies into a savings account. A friend of mine just paid for a holiday on all her 'round ups' money!

Hopefully this helps x

Regarding the pension, I meant I pay 5% so my employer can match me. I was looking at SIPPs and S&S ISAs last night, is it better to open these through a bank or a platform like Vanguard instead? The only problem I have with S&S ISAs and SIPPS is choosing where to invest the money, please can someone let me know as to what I should be looking for or direct me elsewhere?

regarding pension

can you add to your workplace pension? thing is you save tax if you add into your workplace pension so if you can pay extra, its really well worth it - for example as a 20% tax payer adding in an extra £100 per month would see your wages decrease by £75 not the £100

by adding to your pension in your 20s, the benefits are far greater than waiting to top up your pension later in say your 40s - as the money you pay in will have been working for 2 decades longer