Wealth Check: A ring of confidence for the wedding

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The problem

The problem

With a wedding planned for July next year, Suzy Carter is keen to get a decent sum saved up for her big day - the average cost today is around £15,000.

She has made a good start, with £5,300 in an HSBC mini cash individual savings account (ISA) paying 4.8 per cent. And she has just begun paying £200 a month into an HSBC savings plan returning 8 per cent a year if she makes no withdrawals.

Suzy is also looking at saving for the longer term. "I've only been working for a few years but I'm starting to think about my future. By the time I'm 30, I'd like to be in a position to take a few years off to start a family."

Suzy has yet to join her firm's pension scheme as she has to be there for another year before qualifying. She wonders if she should be investing elsewhere in the meantime. She also has no protection policies.

While she has been renting in south London for the past two years, her fiancé, Alex, 26, owns a flat in west London that is being rented out while he studies in the US. "Alex and I will be sharing bank accounts once we're married. But I don't want to be financially reliant on him."

The couple plan to move in together after the wedding and, while they could live in Alex's flat, they would prefer to buy a two-bedroom home nearer to the centre of London.

To do this, Alex could either sell up or carry on renting out his flat for income. However, Suzy is worried that buying a new home will put an extra strain on her finances - especially as Alex will have no guaranteed job to come back to when he returns to the UK.

Her only debt is £4,500 in student loans.

Interview by Esther Shaw

The patient

Suzy Carter, 24, from south London.

Job: account executive for a media agency.

Income: £26,000.

Savings: £5,300 in a mini cash ISA and £200 in a regular savings plan.

Investments: none.

Goal: to save for her wedding, buy a home closer to central London and be in a position to take time off to start a family.

The cure

The couple need to sit down and discuss exactly how they are going to deal with their finances once they are married, stresses Drew Wotherspoon of independent financial adviser (IFA) John Charcol. "Although Suzy doesn't want to be reliant on her partner when they marry, there will have to be a much greater degree of financial sharing if they start a family."

In the short term, she must decide which of her three plans - wedding, house deposit or career break for children - is most important, and save accordingly.

Savings

Given that Suzy is in the strong position of having little unsecured debt, says Mr Wotherspoon, she can focus on her savings. "However, this money will go towards paying for her wedding, so she will need to start saving more for her other goals."

Suzy could get a better rate on the money in her mini cash ISA, advises Alex Pegley of IFA Calculis, by switching it from HSBC (paying 4.8 per cent) to Alliance & Leicester (5.4 per cent).

He also points out that while Suzy's HSBC savings account boasts a market-leading rate for regular contributions, this is dependent on her keeping her current account with the same bank. "This pays virtually no interest on balances in credit, while online banks such as Smile pay in excess of 3 per cent."

Suzy need not worry too much about paying off her student loans, says Mike Pendergast from IFA The One Group, as the interest is less than 2 per cent.

Property

It is likely the couple will need a big deposit if they want to buy in central London, says Mr Wotherspoon. Borrowing on Suzy's income alone will probably not give them enough purchasing power.

"Matters will be helped if Alex can contribute towards this deposit, but this will depend on how much equity is in his flat."

Suzy's salary would allow her to borrow around £97,000 on the usual income multiples, adds Mr Wotherspoon. "But if Alex and Suzy approach a lender that bases its decision on affordability instead, this may be stretched to around £120,000."

The couple's choice of deal will depend on their feelings about interest-rate movements. "First-time buyers often like the security of a fixed rate so they know exactly what they will be paying each month," Mr Wotherspoon continues. "The current best buy is a 4.49 per cent two-year fix across a number of lenders." With this rate on a £120,000 mortgage, the monthly repayments would be around £665.

Retirement

The tax relief available makes a pension one of the most efficient ways of saving for retirement, says Mr Pegley. "The earlier Suzy can start saving, the better. She should look to join her employer's pension as soon as possible."

Until then, says Mr Pendergast, Suzy could consider starting a low-cost stakeholder pension (in which charges are capped at 1.5 per cent). "[Saving into this] could be continued as and when she joins the company scheme - or even transferred into the occupational scheme, should she prefer."

Protection

It will be worth Suzy checking to see if her employer provides any protection benefits - such as sickness pay or critical illness cover - as part of her contract of employment, says Mr Pendergast.

However, she may find that her immediate priorities mean alternatives such as an income protection policy are too expensive for now.

If you would like a financial makeover, write to Sam Dunn at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS, or email s.dunn@independent.co.uk

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