How to split savings

[Showedupatyourparty]

DH and I are in the fortunate position that we can afford to save around £800 each month. We've been putting it in an instant access ISA and have built up a decent buffer to cover emergencies (c.£10k). I've just started putting £100 a month into a Vanguard stocks and shares ISA, and we save £100 a month for our DD (aged 3) in an instant access account. The savings for our DD aren't included in the £800 figure, but the Vanguard amount is.

Does anyone have any advice on how we should split the £800? I'm not sure if we should be putting more of it into the stocks and shares ISA or if we should carry on as we are, or even if we should do something else entirely. Neither of us came from money and we are keen to ensure that we can help DD out in the future if we can. To add, the £800 also covers holidays and part of Christmas (as in we just use money from the savings account for these).

Usual caveat of I appreciate we're in a fortunate position compared to some.

Any advice appreciated!

you don’t mention…. pensions?

I would consult a proper financial advisor.

how much do you spend on holidays?

i spend about £8k -£9k( in total and that’s 1 abroad big holidsy plus on europe city break) and that’s not top end! one adult and two kids)

which would wipe out that surplus

Ideally stocks and shares ISAs would be left alone long term - think 10 years or so, as every time you access it you have to pay fees to cash out etc., which wears away at long term returns. I do very similar to you, c. £100 in vanguard stocks and shares ISA, and then a few hundred in an instant access account with c. 5% return (I use the plum app, but others are available). Slowly transfer more amounts over to stocks and shares as the savings build up and you know you won’t need them for emergencies/holidays etc. best of luck!

It seems like you have a good income, and i’d highly recommend you get some financial education as your next steps could make a massive difference to your future.

Get a copy of The Meaningful Money Handbook (there’s also a youtube, facebook group and podcast of the same name). There are clear step by step instructions from a qualified financial advisor who wrote the book about how to grow your money.

Look at:
ensuring you have insurance eg in case you were ill or made redundant
setting a budget for how many months of expenses you want to have saved, and what you’ll spend on xmas and birthdays
paying into SIPPs or work pensions so you can retire early
investing for your daughter

With the info you’ve given I’d definitely be investing via ISAs and pensions including for your daughter, her money has decades to grow if invested - no point in having it in cash in an instant access account if you don’t need it till she’s 18 for example.

Which vanguard funds have you invested in?

Thanks all.

To answer the questions:

• We don't have private pensions. DH has a public sector job with a decent pension and I pay 7% of my salary (salary is £75k and projected to increase each year) to my workplace pension via salary sacrifice. Maybe we should be thinking about private pensions on top but conscious I want to enjoy life a bit while we can now.

• We did try to set up an appointment with a financial advisor but he wasn't interested. I understood that they will really only take you on if you have lots of money to play with, which we don't. I should look into that further as maybe we were just unlucky.

• We dont spend huge amounts on holidays, maybe a Eurocamp type break for a week around Easter and then a bigger summer holiday booked last minute. The £10k savings amount mostly takes into account our summer holiday this year (currently we have just over £14k in the account). What usually happens is we then build the savings back up again and book our next holiday.

• the intention is to use the S&S ISA for the long term and not touch what's in there. I chose the highest risk profiles and Vanguard just invest in funds on my behalf.

• Will definitely order that book!

I would put more into the S&S ISA. What fund are you in?

Just a small correction on a previous post. If you are using a Vanguard S&S ISA you aren't charged to withdraw your money from Vanguard.

With regards to things like insurances - remember that your need for these will be mitigated by your DH's Public Service job - generous sick leave coverage, and death in service payment. Doesn't mean you don't need them but it may reduce the levels you consider you need.

It might be more helpful to consider your savings pots separately
Short term - what you put away for holidays and Christmas
This should be easy access and calculated based on your experience of your spending habits/expectations. You can still get reasonable interest at the moment, but remember becasue of your salary, only the first £500 will be nil rated for tax.

Medium/emergency - the money you would use to help cover job loss or a large household expense not covered by insurance (new boiler is the usual e.g).
This should also be cash, but once you have reached the amount you feel you need, don't add to it unless that calculation changes. If locking it away in a restricted access account helps, do that. Because it's likely to be a larger sum, you might consider a cash ISA for this.

Long term - This will be the pot that will give you options if you want to retire early, drop hours at work, what ever your long term goals are. The S&S ISA is the best place for this. £100 is a nice start, but once your other pots are full, consider diverting more into this.

Your daughter is young so S&S ISA is probably also best for her. Do remember though that once she is 18 you have no control over that money. Build her a nice sum, but prioritise your own savings and financial security - you can always gift her sums, but when you think she is ready.

Pensions - your DHs pension will be good, but possibly lack flexibility for early retirement. At some point he may want to think about a SIPP.
You say you put 7% in your pension, is that just you or your combined employee/employer contribution? If the latter, even on your salary that may not keep you in the manner you would like. When you feel you can I would begin to raise that percentage, it's also incredibly tax efficient. Check if your employer matches if your put in more.

Hope that helps.

We have a

• shtf fund (in case shit hits the fan)
• fun money fund (for holidays and the like)
• expected annual costs fund (for insurances, TV licence, Christmas shopping, anything that's once a year)
• DNT savings (long term savings not to be touched/investment funds)

We split our savings amongst those pots depending on where it's most needed. ATM the shtf fund is looking alright so we're focusing more on investing. But if the boiler breaks or we needed a new car then we'd use that and stop investing until we'd topped it back up again.

Our saving pots are

Husbands SIPP
My SIPP

Everyday savings e.g new boiler
Holidays
Car - insurance etc but also saving up for new cars when needed
Christmas
School fees - there’s enough money in here to maintain our family lifestyle for a few years if there were job losses

Daughter’s long term savings account

I'd be upping your pension to be honest - the tax savings will pay more than any interest rate. Do the sums now and work out how much you need in a pot to retire. I'm 46 and put 40% of my salary in and DH about 10% (I have a better scheme and do it through salary sacrifice).
Other than that, for shorter term, we have money in a mix of Cash ISAs and instant access savings that pay a good rate (Marcus). I leave the invest part of it to the pension so don't have a S&S ISA.

To add, like PP, we allocate accounts to specific things. School fees, holidays, kids savings, household.
You need spreadsheets!

putting some money in to your pension doesn’t rule out “enjoying life” OP

are you going to have any more children?

if not, i’d substantially ramp up £100 a month

I would do pots, do for example £500 per month goes into an ISA or instant access high interest account for holidays. £100 into another account for Christmas and birthdays etc and then S&S ISA fir the rest which gets left alone.