Financial advice to your younger self?

[YorkshireMum28]

Looking for advice really on how best to ensure financial security in the long run. I’m 29 this year, DH is 35 this year.

H/Hold annual income £80k

Savings
Kids savings (2 young DDs 3y/o & 9m/o) £9k
Our savings £5k
Emergency fund £4k

Debts
Mortgage £79k

Should we be investing money elsewhere at the moment? Open a stocks and shares? Premium bonds? Or build savings first? Savings are sat in three different 4% easy access accounts at the moment. Should they all be together in one?

If you could go back and give your younger self some good financial advice what would it be?

Listen to the meaningful money podcast. It has so much useful advice, I thought I was financially savvy but it has given me so much more info. Really clear and easy to understand.

It sounds like as a couple you're in a really good position- a low mortgage at a young age.
I'd focus on your own personal long term security re earning power and pension contributions, if your earnings are less than half of that 80k. I think looking on the divorce boards would back that up. Of course that may not happen for you, but after addressing debt, home ownership and savings pots (all three of which you're doing nicely on) that'd be the big priority.

The single best financial decision I ever made was overpaying my mortgage - the interest you save ends up being far more than the interest you would get in a savings account. But you obviously do need other emergency savings too, so a bit of a mixture there is good.

PENSIONS

Pension!!!

You could put some of your kids saving in stock and shares ISA and contribute to this regularly. Provided you don't intend to "borrow" this saving the future.

I don't know the amount of your monthly bills, but does your £4k cover at least the monthly bills for 3 months? If it is, you could perhaps increase this to 6 months and keep them in an easy acces a count with the best interest rate. Then, anything beyond this could be put into monthly payment to stock and share ISA. World index fund is the usual advice.

An alternative is to split the saving into 2: half going to mortgage overpayment and half going to stock and share ISA. Unless you have £50k spare somewhere, I am not sure Premium Bond is worth it.

It's been said already but......PENSIONS

I am quite savvy financially but made the mistake of always prioritising other things when I was younger and just paying in the minimum. I appreciate I'm better off than some people my age (late 50s) who didn't really pay in at all but it's only in the last 10 years I've prioritised my pension.

I had a wake up call when I realised my pension was going to be very paltry if I didn't do something about it and even now, having paid in 25% of my income each month for the last 10 years, I'm still going to have to work until at least 65 to be able to retire in moderate comfort. I hadn't appreciated how much I would need my 'pot' to be to give me the income I needed, or how much inflation would eat away at any compounding that happened.

If I'd realised this I'd have prioritised it more when I was younger to give myself better choices now I'm heading towards my 60s.

Pensions without doubt

Pension and ISA and a very clear plan on how to achieve xx income by age 50 so you can retire early.

Pay anything you can afford over the higher rate pay threshold into a pension, as you don't pay tax on pension payments.

Pensions - honestly the sooner you start and the more you pay in the better.

The 'free money' from employer pension contributions is a good one.

But I'd up that emergency fund to cover 6 months of living expenses at least. In the past I had a great pension but low savings / emergency fund so had to stay in a job I really hated.

But you are doing great with a relatively low mortgage and some savings when you are young and have young kids. Well done!

Put loads into a pension pot

That shitehole you are paying a private landlord rent to in the West End of Glasgow is going to be worth one day- try and get a mortgage from somewhere and buy it. Pensions will mean something. Don't give your hard earned earnings to useless cocklodgers who sign on. (Younger self - this always applies to friendships too.)Package holidays are a ripoff.

Agree with others that savings should be big enough for 3-6 months of bills in case one of you loses job/ falls ill.

After that, make use of your ISA allowances, shift some money out of cash into stocks and shares ISA. Use a tracking fund.

Make pension contributions - even at a minimum. Take the employer contributions and tax allowances. Does your employer auto enrol you? Check on this. Very tax efficient. Both of these tips mean you can build a long term advantage over just cash savings. You need to pay into a pension even if you are also over paying the mortgage, because the earlier your pension pot starts, the better. Twenty years will fly by.

Agree put the kids’s savings in stocks and shares too. Do you think university might be an option for them? Start saving more now. Alternatively they could use the money to start a business/ buy a property.

Last, but very definitely not least, make sure you have your own money. Protect your job and earning power and make sure you have a Fuck it Fund. Just in case.

Start saving for pensions early and a decent/affordable amount.

Only fully hit me at 50

I would have retrained in Finance. Accountants in my neck of the woods make roughly £80k.

6 mths outgoings as emergency fund

pensions - especially if one of you is a higher rate taxpayer

don’t upgrade spending every time you get a pay rise - use it to boost savings

anticipate you may earn most around age 45-50ish and plan for income to potentially drop in 50s if you are in the private sector

There is a movement, hope that’s the right word, called Financial Independence Retire Early (FIRE). Some people are very obsessive with it but there is a lot of sensible advice that you can use.

Two past threads on Mumsnet

https://www.mumsnet.com/talk/money-matters/4165470-FIRE-starter
https://www.mumsnet.com/talk/money-matters/5122120-anyone-doing-fire-hows-it-going

Money Saving Expert has tools to help like a mortgage overpayment calculator. The forum section has this massive thread https://forums.moneysavingexpert.com/discussion/2146737/pensions-planning-the-number/p285

For me it’s

• regularly check state pension
• review annual pension statements and make sure you learn about the schemes you are in
• When you get pay increases either increase mortgage repayments or savings by 50% of net increase.
• understand short, medium and long term savings as well as risks
• take a balanced approach, have fun and make memories with your DC to them the cost is not relevant its spending quality time with Mum and Dad.

Overpay mortgage as much as you can, pay into pensions, if you don’t have company sick pay consider income protection insurance. It’s a bit grim but consider the worst case scenarios and take life insurance and critical illness cover while you are still young and healthy it is much less expensive.

Thank you all there’s been some great advice so far!

We already overpay £200 a month on the mortgage, we almost moved into a bigger house this year but decided against it after nothing came up. The money we would have been paying for a new mortgage we’re going to overpay on this one instead so that’ll be an extra £600 a month.

The emergency fund we put £20 each in a month and have done since I can remember. I will have to up this though until we’re at the point we have 6 months of bill money in so thanks for that advice.

Many comments mention pension. How do I go about upping pension contributions? Is this a conversation we need to have with our employers? Or direct to whoever holds our pension? Or do we open another savings account and that’s the pension pot? Sorry if I sound silly, you’re not taught this stuff in school and our parents have never had money. DH pension is the bare minimum, mine is a local government one.

I started personal pensions in my 30's and stopped 10 years later - they are now earning more each year than I am.

Pensions over overpaying mortgage - it makes such a difference if you start early (I did not)

yes talk to your employer to see what you can get in free money, otherwise start a private one alongside

Really? Only for 10 years of contributions

Yes, your payroll team should be able to do it; just tell them you are contributing more than the compulsory and the amount or percentage. Are you contributing the minimum? Have you checked your payslips?

Just keep an eye on your pension statement to ensure they are correct and reflecting your contributions and your employer contributions