Wealth Check: 'Our savings have been torn into confetti'

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The Independent Online

"The wedding is going to wipe out almost everything, so we'll have to start saving again."

As she prepares for her wedding in June, Helen Prentice wants to know how to deal with the financial effects.

A business executive, Helen earns from £18,000 to £23,000 a year and finds it hard to save much. "At the moment, I feel I have to count every penny.

"But we want some financial security so that if we suddenly had to pay out for something [in an emergency], it wouldn't be too hard to come up with the cash."

Helen and her fiancé Brendan Streeter, 26 and 37 respectively, are tying the knot at a cost of around £15,000. In a bid to free up some funds, the two sold their separate flats and bought a house together last November. This left them with around £7,000 in savings - half of which has already been eaten up by the wedding costs.

The money is in Nationwide building society's e-savings internet account paying 4.55 per cent.

Helen has no credit card, loans or any other debts. But she is concerned about her lack of retirement provision. With only a very small pension from a previous job, she would like to start saving again, but feels that she can't until the wedding is out of the way.

Her long-term plans include a family and a home in the Sussex countryside.

At present, the couple live in their £300,000 three-bed property in Hove. They bought this with a £180,000 repayment mortgage from Nationwide. The two-year tracker deal has a current rate of 4.49 per cent.

Helen has income protection with her mortgage.

The cure: How to 'make up for lost time'

Some basic steps should help put Helen back on track, according to our panel of independent financial advisers (IFAs).

By making use of mini cash individual savings accounts (ISAs) and small but steady stock market investments and pension contributions, she can build a platform for the future.

Her priority, says Daniel Clayden from IFA Clayden Associates, should be to start a cash fund as soon as possible - for emergencies, parenthood or the dream home.

Savings

After the wedding, Mr Clayden suggests Helen and Brendan each contribute up to £250 a month into a mini cash ISA for tax-free growth. The Halifax offers one of the best rates at 5 per cent, he says.

Over the longer term, Helen could also consider the stock market. If she used her mini cash ISA allow- ance of £3,000, that would leave up to £4,000 each year for an equity ISA. For a lower-risk approach, a UK FTSE 100 tracker fund might suit. If she is prepared to chance her arm and go for higher returns, a Far East fund fits the bill.

Property

The mortgage deal is "very decent", says Tony Catt at the IFA of the same name.

But at the end of this two-year introductory rate, they should remortgage to another lender - or ask Nationwide for a good deal - to avoid slipping on to an expensive standard variable rate, says Mr Clayden.

"But watch out for potential remortgaging costs - such as valuation, administration and legal fees."

Nationwide charges a £90 exit fee for switching to a rival lender.

Retirement

Helen should start saving as soon as possible, says Caroline Anstee at IFA Elements. "[Later in life], she may have lower earnings for a time if she chooses to be at home with the kids."

Under new pensions legislation, coming into force on 6 April, people will be able to make bigger contributions, says Mr Clayden. "Depending on affordability, Helen will be able to make up for lost time."

What she can do depends on the scheme offered by her company, but the new rules allow workers, if they wish, to put their whole salary into an occupational pension, and any lump sum savings into a personal plan.

For a personal pension, a low-cost stakeholder could be a good place to start. "She should start making some contribution - even as little as £20 per month," says Mr Clayden.

Protection

Mr Catt recommends Helen review her income protection policy and see how it fits in with any sick pay arrangements at her firm.

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