Is 75K enough? Should I lighten up on the savings?

[REDB99]

For context I am a single parent. I earn 85K in a busy, pretty stressful job but do get some time where I can work from home which means less stress at times (still work to do but no commute).

I can afford all bills. I save between 1.5K and 2K a month. No desire to move house, happy where we are. One DD who is 8.

I have saved hard in recent years and now have 75K, this is not earmarked for anything although in 2 years when my mortgage term is up I’d like to pay off maybe 20K. I am 45 and will need to work to around 65. Will have a good pension when I do retire.

Should I relax and stop putting money in the bank? I’m thinking of going to point 7 which will be just under 60K, I get £300 a month in child maintenance. We have holidays that I’m happy with, I can pay the bills, I have 75K to fall back on.
On 60K I’ll be able to put around £850 - 1K away a month but would still prioritise being able to have holidays. Spend about 5K a year on this.

Would you start to relax a bit, go part time and have more time for hobbies, actually be at the school gate rather than needing after school club every day? Or is getting more money put away for a rainy day sensible when I generally find full time work okay but have times when the pressure is very intense?

Assuming your DD seems to be ok with after school club and happy generally, and as you are ok with FT work, I would suggest a middle option - rather than going part time, take 2-3 weeks unpaid parental leave per year and spend extra time with DD in the school holidays.

Obviously review if DD or you become unhappy with the current set up

It's up to you. What do you want to do? What's best for you? What's best for you DD?

Thanks, I had thought this could be better option so that I don’t miss out on the full time salary and the pension benefits of being full time.

I do think I’m okay with full time, I just feel that I don’t really know what the money is for. I’m not spending it, I know I may as well add to it while I can as life can turn on a dime. I’m just feel like as I have nothing in mind for the money other than it being for ‘emergencies’ should I relax about it. But you’re right, only I can decide just interested what other people might do.

I would try to improve your pension so you can retire a bit earlier before stepping back too much.

Could you stay at your grade and cut your hours to give you more time? A nine day fortnight or a four day week.

No point dropping a grade and doing the same hours.

What do you want to do? I'd go for it if you want to and sounds as if you're able to.

I'm part time and love the balance it gives

For me, this decision would rest entirely on what is important to me personally, so I would advise the same for you.

I would value additional time with DD more than additional money, so my choice would be to go part time. Time over money always wins for me, provided we have enough to be content.

There really isn't a right answer as such. Some will say max out for a rainy day and pension because that financial security is important to them. You don't get to the end of life and get a gold star for making correct decisions. You can only do the next right thing.

Why would you only pay off £20k of your mortgage? Personally Id prioritise time with dc (so reducing hours), but any savings go to paying down mortgage as quickly as possible.

When I have worked part-time I have rendered the same work as full-timers for less money.

Two things: spend a bit more on fun and self care and be mindful that your dd will get much more expensive as she gets older.

Well done btw - go well.

I’m a single parent too and am very risk averse. When you don’t have another adult in the household, you are that bit more exposed if (say) you became unwell, got made redundant, got burnout, needed to care for unwell parents … so I’d be inclined to stick with what you are doing, get advice on best return for your savings, and aim to reduce hours in your 50s when hopefully you’ll be on a good increase of your current salary.

Based on how you have described things I wouldn't go part time or into a lower paid role (which I think is what you mean by point 7, not sure though). I would look for any ways to improve your current lifestyle as @minipie suggested.

In terms of savings, I would keep going with them and do three things at whatever pace feels right for you: build your pension pot, overpay on the mortgage, save into a children's ISA for DD. You are right that saving too much cash isn't the best idea but you should now aim to capitalise on any tax benefits (via pension and ISA savings) and plan for the future.

Sounds like you are doing brilliantly all round, by the way!

The money could have purpose like saving up for university costs for DD or a house deposit for her or paying off more of the mortgage. You could set DD up for financial security.

Have a look at this OP:

I just feel that I don’t really know what the money is for.

What about your daughters university education? Or money to start her business? A Deposit for her own home? Your early retirement?
well done £75k is amazing but not enough and definitely not in a bank it should be in stocks, index funds s&p500 etc for better returns. And working to 65?….no keep saving and investing now, so you can retire way before 65 x

I think it depends a lot on what you want to be able to do for your DD - do you want to pay her way through university? House deposit?

I just feel that I don’t really know what the money is for

So many possible reasons why extra money might be a godsend or at least very useful in future.

And if you don’t need it, maybe you can retire earlier than 65 - many people feel done with work by 60 if not earlier especially if working FT.

I would be at the school gate. They're only small once and I'm sure she'd prefer having time with you over an extra X for a house deposit in 20 years time. You can always go back to FT once older or things change.

If you get ill and can’t work, that 75K will go really fast. I’d keep FT and provide financial stability for you both. I would take unpaid parental leave though so you can be around more for school holidays to do lovely things. Your DD will remember that

Actually @Grrrrrrrrr8 my mum was a sahp and I don’t remember her picking me up from school at all. She is lovely but she would also have been lovely with a job

I’d be at the school gate and reassess when she’s older.

You don't mention how big your pension pot is now. You should be maxing out contributions every year if you can.

You don't say how much of your mortgage is left. Why are you banking money at (I assume) a very low interest rate when you could be reducing your mortgage now?

I am a little older than you, and I'm doing both of these. I've also taken advice and am moving my pension out of my work scheme to one that is better managed.

Finally, if you can, max out your ISA allowance (£20k) and the JISA allowance annually (£9k) and start a SIPP for your child to get the 20% free tax relief.

Any left overs buy premium bonds for fun. Easy access and higher rate than a bank.

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This.

I am not a single parent but was made redundant and went from £74k a year to £0!! I have to depend on DH for everything (thankfully I have redundancy pay and savings to cope for personal expenses)

If I were you I would continue to be FT. Work to pay off mortgage and put some away for your DC 's uni.

And as a PP has mentioned, take a couple of weeks off as unpaid during school holidays.

But OP has said she would be at the school gate. She's not talking about giving up work altogether. There is a middle ground and I think the OPs suggestion is a good one. As a child, I definitely felt a difference in the days I came home to my mum and the days she was working. She was always more stressed on working days and there was less time to chat and download.

Make
Sure your 75k is well
Invested. 6 months salary in my view is a sensible amount to keep in cash.

When my children were younger I wanted to scale back hours. I did for a few years but now their grown up and working I'm glad I went back to full time.

Your pension will get tax relief so perhaps wiser to save in there. 40% tax relief goes a long way. For every 1000 you save, it costs you 600 so much more efficient than what you are currently doing.

For me it's a balancing act - being debt free, repaying mortgage, maximising pension, paying into an ISA (for tax free income once retired) and keeping 6 months of cash savings.

You could put all except 5999 into your mortgage to bring your payments down very low and then work 50% hours to bring your salary to 42,000 and you'd probably be entitled to universal credit which would mean you'd get 85% of your child care paid.
I have only just found this out after wasting tens of thousands of savings on childcare and unpaid mat leave.