Wealth check: 'Are a second child and a forever home possible?'

A couple hope to have another baby in a new house in five years, but a salary freeze and low interest rates are hampering their progress

The patients

Fiona and Lance Plummer, both 28, want to save for a second child, but are struggling with frozen pay and low interest rates.

Their daughter Esme is a year old, and they would like a sibling for her within the next five years. "We are saving for this – and hope also to buy a 'forever' family home in the same time period so that we can settle into family life," Fiona says.

Lance, a police officer, and Fiona, a part-time teacher, have a combined income of around £40,000 a year. "But we're both subject to salary freezes," she says. "Lance's income won't increase until September 2014, and mine is frozen until next year, so we have to work with what we've got."

At present, they pay £718 a month for a 35-year, £175,000 repayment mortgage with Nationwide at a rate of 1.94 per cent above base rate – currently 2.44 per cent. They bought their three-bedroom, semi-detached house in Southampton in December 2008 for £191,250.

"We would like to buy the sort of 'forever' home that everyone dreams of for their family," she says. "The spacious four-bed house with a big garden in a quiet and safe village with good schools near by – in our area, at minimum this would cost £300,000." However, she adds that "this feels a long way off" in the current climate.

They have a joint current account with Co-operative Bank that holds both salaries and which they use to pay bills, alongside separate accounts for personal use.

At present, they also try to save around £300 a month into a saving account paying 0.25 per cent, also with Co-operative, to pay for holidays and use as an "emergency fund".

Lance has contributed to the Police Credit Union savings scheme with a rate of 2 per cent for the past six months, paying in £100 a month.

For Esme's future, they opened a Junior ISA with Fidelity. This holds around £1,200 spread between Henderson European and First State Asia Pacific funds.

For longer-term planning, they have both been paying into their employers' pension plans for four years.

Turning to debt, they have £16,000 in student loans. Lance has also been paying £60 a month since May last year for the Cycle to Work Scheme. "This is an 18-month scheme," says Fiona. "Lance got a voucher for £1,000 from the government and bought a bike and safety gear to get to work." She adds: "This allowed us to go down to one car, saving around £1,900 a year – so it's been worth the money."

For protection purposes, Lance has various forms of cover alongside his work. "He is provided with all sorts of insurance policies from death-in-service to dental and travel cover," says Fiona. "The life cover, for example, provides around £180,000 on death and about £5,000 for other injuries like the loss of a limb."

The cure

Fiona and Lance have a clear plan to save for a second child and to upsize to a £300,000 house. "This will require careful budgeting," says Andrew Reeves from independent financial adviser The Investment Coach.

Even so, they are sensible to be considering their financial situation and how to maximise their incomes, stress our panel of independent of IFAs.


"Starting a family creates a severe strain on finances and even more so if a second child is planned," says Philip Pearson from Southampton-based P&P Invest. "The best way to overcome this is to budget and make provision for regular monthly saving. One option is to keep a diary for a month where every item of expenditure is recorded to see how much can be saved." They should include everything paid for by cash or card.

Fiona says they save around £300 a month to pay for insurance and other extras. "They should check out cashback websites such as Quidco and Topcashback to see if they can get benefit from money back when paying for anything. Also use price comparison sites at renewal time," says Mr Reeves. "As Esme is a year old Fiona and Lance could consider saving for nursery with childcare vouchers," he adds. "As the money comes directly from gross pay this also saves income tax and national insurance, and both their occupations are likely to come with schemes to take advantage of this." They can claim up to £55 a week under this scheme.


"Interest paid on regular savings into the Co-operative account and Lance's savings in the Police Credit Union is taxable, so moving this money into a tax-efficient cash ISA will enhance their return," says Gareth Reynolds from MGS Financial. Cheshire Building Society is currently offering one paying 3.35 per cent on its cash ISA.

"The Police Credit Union does come with life cover at no extra cost, but the couple should compare the term insurance rates they could get elsewhere and might be surprised how low the equivalent monthly premium would be to replicate this benefit – even in a high-risk occupation like policing," says Mr Reeves.

Fiona and Lance should ensure they can easily review the Junior ISA every six months or so as the investment funds are relatively high-risk – although given the long-term timeframe this might be the best option.


Unfortunately, the "forever home" could be a tough objective. "They would need a chunky deposit," says Mr Reynolds. "And as they have a small amount of equity in their current home with little prospect of this increasing in the short-term, this would probably have to be met from savings."

Unless the Plummers have a significant salary rise, the advisers agree there is little chance of them moving to a bigger home in the same area in the next five years. "They should discuss their dreams with their parents to see if any help can be provided in meeting the cost of their next home," says Mr Pearson.

"If this is not available, then they will need to make a significant effort in building up cash savings over at least five years."


Lance and Fiona should continue to pay off their student loans gradually and, once the bicycle loan has been repaid, the £60 a month should be re-directed into regular monthly savings through a cash ISA.

They should also avoid taking on further debt, stress the advisers, and concentrate on saving and meeting the repayments on their mortgage.


"While Lance has protection, £180,000 in the event of his death would take care of any mortgage and debts, but leave little else," warns Mr Reynolds. "A separate policy could be arranged to provide a monthly income until Esme's 21st birthday or beyond – this should be index-linked to give Fiona a replacement for Lance's lost salary."

Fiona should also consider putting cover in place for herself. One option is a family income benefit policy. This provides a regular income over a fixed term and is ideal for meeting the needs of a young family, says Mr Pearson.

"They could consider a joint life plan providing a benefit of, say, £1,200 each month in the event of death or diagnosis of critical illness." This can be bought through Scottish Provident, for example, for a monthly premium of only £5.54 a month, he adds.

Critical illness plans should be considered as this is more likely to occur than early death. "As both are relatively young, it will be cheaper than delaying as the cost increases with age," says Mr Reynolds. "Protection is always the last priority for most people, but is very important."

Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
sportDidier Drogba returns to Chelsea on one-year deal
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Dejan Lovren celebrates scoring for Southampton although the goal was later credited to Adam Lallana
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
Rhys Williams
commonwealth games
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    The benefits of being in Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    Test Analyst - UAT - Credit Risk

    £280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

    The BBC’s wolf in sheep’s clothing

    What will Evan Davis be like on Newsnight?
    Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

    Finding the names for America’s shame

    The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
    10 best reed diffusers

    Heaven scent: 10 best reed diffusers

    Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
    Commonwealth Games 2014: Female boxers set to compete for first time

    Female boxers set to compete at Commonwealth Games for first time

    There’s no favourites and with no headguards anything could happen
    Five things we’ve learned so far about Manchester United under Louis van Gaal

    Five things we’ve learned so far about United under Van Gaal

    It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
    Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

    Beyoncé poses as Rosie the Riveter

    The wartime poster girl became the ultimate American symbol of female empowerment