Not really saving

[CharlieMM1]

Looking to see if this is normal as I am a bit worried. Please be kind.

We have a mortgage of just under 1000 a month but we overpay so pay in approx 1,500 a month. It should be finished in about 4 years. We have two young kids in paid nursery. I have a decent salary (65k) and my partner similar, but since the nursery fees started I don't really save anything.

I don't consider myself a big spender at all. We don't go out anywhere expensive and live what I consider to be a very modest life.

I am going to sit and pick through where my money goes to ensure I am not missing anything, but I guess I wanted to guage how normal or unusual this was to start.

Before kids I used to save quite a bit each month. All money I have saved had already gone into house.

So you both bring in around 4K
So 8K
-1500
= 6.5

Are your outgoings and nursery fees high?
Can you post your outgoings?

Overpaying your mortgage IS saving … and 2 lots of nursery fees is a big expense. Your incomes are moderate so not also saving loads each month seems normal to me

So your income and mortgage including overpayment is very similar to ours, your income very slightly higher.
The main difference is that you have 2 DCs in paid nursery, whilst we only have 1 lot of nursery fees as our other DC is in school so cheap wraparound only. We save around £1k a month in addition to the mortgage overpayment. We see the overpayment as savings too. As long as you have an emergency fund I wouldn’t be too worried, as your savings are the overpayment currently and when you stop even one of the nursery fees you’ll be able to save lots more.

Exactly!!!! I will do the maths and work out where it is going. Food and nursery fees are high.

Bills

It’ll be really useful to track your spending for a while to check where it’s all going - without doing that, it can be easy for small expenses to add up without realising on stuff you don’t actually care much about, like random subscriptions and top-up supermarket shops. And the dreaded takeaway coffee 😂 You can probably trim your spending a bit by being more aware of where your money’s been going.

Overpaying your mortgage is great, but it means the money isn’t accessible - this could be fine, or it could be a pain. I’d make sure I had enough cash savings I could access in an emergency before overpaying my mortgage. Also check you’re contributing to your pension at a decent level, especially that you’re getting any employer match.

Assuming you’re getting child benefit and using funded hours / tax-free childcare where you can!

Agree about emergency fund/ savings

If your nursery bill is high? 2K or so then you can just wait until DC go to school and then chuck that cash at your mortgage.

Ok it's actually not as bad as expected. I am basically basing my concern on December and the end of my maternity leave and January already looks a lot better. I do think I need to get a better understanding of where my money is going though and to see budgets for things.

If you think you need more of a savings cushion than you have, stop overpaying the mortgage and save it instead? Then when you have enough to feel comfortable, you can return to mortgage overpaying. I know it can save you a lot over time, depending on rates, but we’ve never prioritised overpaying the mortgage as I prefer to put any spare we have into savings or pensions. (Totally accept this is a personal choice and we also have a low mortgage rate having remortgaged in 2021, but just sharing what we’ve chosen to do).

You're probably at your most expensive time of life so don't beat yourself up about 'not saving' although overpaying your mortgage and being near to paying it off when you are young enough to have a baby is a great position to be in.

But I'd not rush to overpay at the expense of a decent emergency fund especially as you should be earning more on your savings than your mortgage is costing you so it's a waste of money to overpay.

The Moneysavingexpert money makeover walks you through reviewing your finances and gives pointers in reducing costs to free up more money to save and spend.

https://www.moneysavingexpert.com/family/money-help/

I’d certainly want to build up an emergency fund in your situation but happily you could skip two months of overpayment and have £1000 as a fund which would be enough for the real basics. If you’re paying council tax over ten months maybe add the money you’d otherwise pay in Feb and March to it.

When does nursery end?

I agree with pp re having an emergency fund. But aside from that, you’re in a good financial position if you’re going to own your property in 4 years with such young children. In 4 years time you’ll have £1.5k spare, and no nursery fees!
I felt skint in the childcare years, I think we all do.

I have 30,000 in savings which I don't touch - effectively my own emergency fund. But my worry was that I wasn't really adding to it. Although as mentioned above it looks on closer inspection I am basing this on a couple of recent very expensive months.

Thanks for the responses. I am not a big spender but I do tend to get a takeaway coffee every morning and I do know that I could knock it on the head. Bit of an expensive habit.

My husband also has significantly more in savings than me.

Easy= dont overpay your mortgage. Most people with young kids would have more than ten years left on their mortgage

Yeah I would prioritise investing that £500 over paying down the mortgage

How much do people need in a savings pot before they pay down their mortgage in overpayments. To you personally, when is that pot enough?

I would only pay extra off my mortgage once my ISAs are maxed out.
Once it's paid off you can't easily get it back, and I get more interest on my ISA savings than I am paying on my mortgage so it would be stupid to pay anything extra off the mortgage.

We have 9k take home. 2 children in nursery plus 1 in wraparound care at school. Mortgage much higher than yours at 3.2k. Eek. We manage to save at least 1k per month. But your nursery fees may be treble ours!

I agree that I’d prioritise saving over overpaying mortgage unless you have a really ridiculous rate.

I don’t think you’re doing badly though - I don’t know anyone our age who is even close to paying off their mortgage! You’ll be (relatively) loaded when that ends and nursery fees are over.

I am 39 so not young. Realised I had not said that

The 30k was a bit of a drip feed OP.

You’re fine. Overpaying is a fine strategy providing the interest savings will outweigh interest earned - depending when you took your mortgage only you will be able to assess this.

You’ll be able to pick up savings of 1500pm in four years, probably much more if you’re away from fees by then. At that point, pay increases etc make saving £2k per month feasible.

Don’t stress it now.

I agree that was a drip feed although not intentional, sorry. That is money I saved a long time ago pre last maternity leave and have not added to in a long time, so it's not active savings in my mind, if that makes sense. And my initial concern was that I don't feel like I am really adding to any pot at this stage in my life.

I make zero overpayment as interest on our savings is higher.

Tbh with 2 x children in childcare you are doing well to have surplus

Being mortgage free in 4 years with two v. young kids is fantastic!

.but you have many more years to work than you have worked already so lots of time to save. And if you get your mortgage paid off and nursery fees stop you'll have a lot more money to invest/save

Are you contributing to a pension OP? You have a good amount of savings (what are you saving for out of interest?) and a plan to clear the mortgage. In your shoes I’d be looking to bump up my pension once the nursery fees end.