Data scientist Jason Dealey from south-east London is keen to save more, but not sure how best to do so. In the short term, he wants to build up a rainy-day fund, and in the longer term he wants to amass a big enough deposit so he can take the first step onto the property ladder.
In addition, as he's about to head off skiing for a month, the 25-year-old who earns £38,000, knows that he's going to need to think even more carefully about his money management over the next few weeks.
"I am still planning on working while I'm away," he says. "But I will have to budget carefully so as not to have to dip into my savings."
"I've been in this job for just over three years," he says. "This was my first job after university."
To date, Jason has managed to slot away £3,100 into a cash e-Isa with NatWest, but knows he has a long way to go if he is to build up a big enough sum for a house deposit in London.
The NatWest e-Isa is paying 2 per cent for balances under £10,000.
"I'm also considering transferring the money in my cash Isa into stocks and shares, as I think I now have a good amount to work with," he says. "But I'd like to know if this is a sensible decision.
"At the same time, I'd like to know what other steps I should be taking to start putting more money away each month, and where I should be saving that money."
Aside from the NatWest Isa, Jason has no other savings accounts or investments.
He does have a credit card, a NatWest Yourpoints World Mastercard, but he is disciplined about paying this off. "Initially I had a paltry credit limit of just £425 on my card, but this is now £1,250," he says. "I tend to buy everything on this card, and then pay it off in full at the end of the month."
Jason has no other cards or loans, and takes an active interest in money management.
"I keep track of my spending on an iPhone app," he says. "I also make purchases through Quidco.com whenever I can, to benefit from cashback."
At present, Jason is renting a three-bedroom flat in Kennington along with two other people.
"I moved in to the flatshare around two and a half years ago and pay £552 a month in rent," he says. "On top of this I pay £80 a month to cover bills."
Jason pays into a workplace pension through his employer. "The pension is provided by Zurich," he says. "I pay in 5 per cent which is around £140 each month. My employer then contributes 5 per cent."
While Jason has no protection policies in place at present, he's keen to know if this is something he should look to consider.
Our panel of independent financial advisers agree that Jason seems to have a very sensible attitude to debt; they also commend him for keeping track of his spending.
They suggest he should focus his attention on amassing the biggest house deposit he can, while keeping up with his pension saving.
Build up savings
Nick Evans from adviser One Life Wealth Planning, urges Jason to work on building his savings to ensure he has adequate emergency funds in place in cash.
"Generally speaking, this should be between three and six times' typical monthly spending," he says. "Having cash will give him a good foundation to build on over time."
This will also help Jason avoid the need to go into debt, which can be very expensive.
In the current tax year, Jason is able to save up to £5,640 into a cash Isa; interest is paid tax free.
While Jason may be able to get a slightly better rate by shopping around, Patrick Connolly, from adviser AWD Chase de Vere, points out that with the amount he has slotted away at present, this won't make a major difference to his overall returns.
"I'd be inclined to suggest that he leaves his existing savings where they are," he says. "But Jason should keep track of the rate he is earning with a view to transferring his money if this should get uncompetitive. This will get even more important when he has larger sums squirrelled away."
Don't rush into stocks and shares
While Jason is thinking about transferring his cash Isa into a stocks and shares Isa, Aj Somal, from adviser Aurora Financial Planning, says this may not be in his best interests at this stage.
This is a view shared by Mr Connolly. "Jason should aim to stick with cash Isas while he builds larger savings for both short-term needs, such as an emergency fund, and to help pay for his skiing holiday," he says.
"He should also add to his cash savings to save for longer-term goals such as a mortgage deposit. A deposit is best achieved by saving in cash but he needs to realise that this can take some time."
Work hard at saving for a deposit
Mr Connolly says most lenders are now looking for a minimum deposit of 10 per cent, but adds that an even higher deposit of 15 per cent might be needed to get some of the better mortgage deals.
"Jason really does need to focus on his cash savings," he says.
Mr Somal suggests Jason should look to make savings by reviewing all his outgoings. "He may be able to save money by switching energy supplier," he says. "The additional disposable income could go towards the deposit."
Mr Evans adds that Jason should try to be clearer about his goals. "He should set time deadlines, and be specific about what he is aiming for and why that is important," he says.
"This will help him reach a balance between saving and spending each month."
Maintain pension saving
Jason is in a decent position in regard to his pension saving, according to Mr Connolly.
"He is paying in regularly, and his employer matches his contributions," he says. "I would strongly encourage Jason to continue with contributions at this level."
Mr Connolly recommends Jason review where his pension money is invested to ensure this is appropriate. "As he is young and making regular contributions with a long time remaining until he will draw pension benefits, Jason can take a reasonably high, although not excessive, level of investment risk," he says.
"For most people, the best way to save for the longer term is a combination of pensions, which provide initial tax relief but which aren't flexible, and stocks and shares Isas, which are also tax efficient, but which have far greater flexibility."
That said, Mr Connolly adds that while Jason should look at stocks and shares Isas at some point, his more immediate priority should be building his cash savings to meet shorter-term goals.
Mr Somal says Jason should seek to increase his pension contributions over the next few years.
"This will further enhance his retirement provision going forward," he says.
Consider a cashback card
As Jason pays off his credit card each month, Mr Somal suggests he could consider a cashback card.
"This would reward him for usage," he says.
Mr Connolly urges Jason to find out what protection products are offered by his employer.
"Many employers provide life assurance and income protection benefits," he says.
Mr Evans adds that while Jason does not need life cover at the moment, he does need an income protection policy.
"This would protect him if he were unable to work due to sickness or disability," he says.Reuse content