Wealth Check: 'Can I save for a flat and a wedding in two years?'

A 26-year-old administrator is keen to leave his parents' home and to pop the question to his long-term girlfriend, so he will need a big savings pot



The Patient


James Cole from Chingford, in north-east London, is settling into a new job, and looking to take the next step with his long-term girlfriend. The 26-year-old started work as a property administrator in a residential block management firm earlier this year, and is on a salary of around £21,000 a year.

While James lives with his parents and pays just £200 a month in rent, he is keen to move out and get a place of his own. "Within the next two years, I would like to have saved up enough to move into a rented property with my girlfriend," he says.

He also has plans to tie the knot."I would really love to get married and then go on a long honeymoon for one or two months," he says.

James is in the fortunate position of having no debts. "I do have an overdraft on my current account with Barclays, as well as a Barclaycard Credit Builder card with a limit of £450, but owe nothing on either of these at the moment," he says.

However, James has no money in either savings or investments. "I'm keen to build up a savings pot both for the short and longer term," he says. "I'd like to set up some kind of high-interest savings account, as once I've got this in place, I can focus on putting money away to pay for a rental property, and to pay for a wedding."

James does have a pension with Scottish Widows, but it is currently frozen. "I took this out with one of my previous employers, and there is around £6,000 in the account," he says. "I'd like to know what to do with this money. I'd also like to start paying into a pension again."

James has no protection policies in place.

The Cure

Our panel of independent financial advisers agree that James is in a good position to save, as he doesn't have any debts and is only being charged a modest rent by his parents. But, they warn, he will have to save hard if he is to afford not only moving into a rented home in the next two years, but also the cost of a wedding.

Calculate rental costs

"James will need to save up a minimum of four weeks' rent – and possibly as much as six weeks' rent – as a deposit," says Anna Sofat, from Adidi.

He will also need to save up for the first month's rent and any agent fees.

"Agent fees range from £25-£150 or more, depending on the property, agent and location," says Danny Cox from Hargreaves Lansdown. "Average rents in Chingford range from £572 a month for a studio flat up to £889 for a two-bed flat.

"To secure a one-bed flat, James has to save £1,686 to cover the deposit and first month's rent, plus any agent's fees. There will also be more costs if he moves into an unfurnished property."

Get into the savings habit

After tax and national insurance, James will take home around £1,360 a month from his earnings of £21,000, according to Mr Cox.

"After paying his rent to his parents, he has the chance to save considerable amounts of the remainder," he says. "Once James has moved into a rental property, he will need to allow for utility bills, council tax – and potentially service charges – as well as his monthly rent."

He will also need to factor in normal outgoings such as food, phone and his social life. While James will be able to share these costs with his girlfriend, Adrian Lowcock, from Bestinvest, says he should get into good budgeting habits now while he has the opportunity. "He should look to draw up a budget of his incomings and outgoings," he says.

"Once he has calculated how much he spends each month, and on what, he can work out how much he can realistically afford to save each month."

Set targets

As the average cost of a wedding is around £11,000 – including a honeymoon of £1,500 – James is going to need to save hard, says Mr Cox.

"This is especially important as he plans to honeymoon for up to two months," he says. "He also needs to allow for unpaid leave, when he won't receive an income, but will still have to pay rent and bills."

Mr Cox urges James to plan ahead and target how much he needs to meet his two main aims. "If his target is £20,000 over two years, say, he needs to save £833 a month."

With this target in place, the key is to stick to it. "One of the easiest ways to do this is by having his savings leave his account the same day he is paid," says Mr Cox. "If savings are left until the end of the month, there may be no salary left."

The right account

James should consider an easy access individual savings account (ISA) as the interest is tax-free, according to Mr Cox. "He can save up to £5,340 in a cash ISA this tax year, and the allowance is then due to increase by inflation from April 2012," he says.

Ms Sofat suggests that an alternative to an ISA might be a regular saver account. "James may want to consider a fixed-rate regular saver, as some banks offer attractive rates if you lock your money away for a period," she says. "Northern Rock is paying 4 per cent on its fixed rate regular saver."

Mr Lowcock adds that investments are not really an option over such a short time scale. "The risks are too great, as if the markets fell, the investments would not recover their value over two years," he says.

Restart pension scheme

Ms Sofat urges James to check if his employer offers a pension scheme. "If there is one, he should join," she says. "If not, he risks missing out on any employer contributions."

If there is no scheme, Mr Cox says it is still worth restarting pension saving. "This may just be a modest amount to reflect his other goals," he says.

"Most pension schemes will allow a contribution of around £50 a month, and this will keep his pension savings ticking over while he saves for more short-term goals. He can increase this amount in the future."

According to Mr Cox, the fund of £6,000 James has already accumulated may seem small, but it is actually a decent size, given his age."The existing Scottish Widows pension is likely to be a good scheme, so he could restart contributions to this," he says. "The alternative is to start a new scheme and transfer the Scottish Widows value over to consolidate."

Protection

As James does not have any family responsibilities, he does not need life cover, says Ms Sofat, but he should give thought to income protection. "At his age, he should be able to get a policy for £14.75 a month," she says.

Do you need a financial makeover?

Write to Julian Knight at The Independent on Sunday, 2 Derry Street, London W8 5HF. j.knight@independent.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
Life and Style
Gap announced its same-store sales were down 6 per cent in August, and 3 per cent in September
fashionAlexander Fury explains where Gap is going wrong
PROMOTED VIDEO
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
News
Rainbow List
News
Bruce, left, with Cream bandmates Ginger Rogers, centre, and Eric Clapton in 1967
people
Sport
football
Arts and Entertainment
Cronenberg: 'Ageing is part of life. There is a beauty to it; you just have to find a way to grasp that beauty'
arts + ents
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?