Wealth Check: 'When will I be in a position to start a family?'

Melanie Thomas, 26, a quality assurance officer from Leeds, is getting married in April, and her financial hopes are pinned on having enough money for the big day, the honeymoon and eventually a family. "I'm aiming to save £1,000 more for the wedding, £4,000 for a Caribbean cruise or a trip to Japan and £10,000 for when we start a family," she says. Melanie's financial situation is in good shape, but it doesn't mean she's worry-free. Alongside these ambitious savings hopes, she is "concerned about being able to afford to have a family, pay the mortgage and work part-time all at the same time."

Case notes

Salary: Melanie earns around £25,000-£30,000 a year.
Monthly outgoings: She pays £400 in tax and NI contributions, and spends around £1,300 on living expenses. She saves £200 a month.
Savings: Melanie has an individual savings account worth £1,300, a joint account worth £4,500 and three company share savings plans.
Mortgage: Variable rate with Halifax that has 22.5 years to run.
Debts: £0.
Pension: £180 a month.

Three independent financial advisers offer Melanie their help this week: Anna Sofat of Addidi, Steve Laird of Carrington Wealth Management and Dennis Hall of Yellowtail Financial Planning...

Savings

Melanie's savings goals are extensive, but she already has the groundwork in place, and is consistently saving £200 a month, with an £80 buffer between her income and outgoings every month.

Her short- and medium-term goals are easily achievable with her current saving plan. "Melanie wants to save a further £1,000 for her wedding and around £4,000 for a decent holiday, which can be achieved by the couple each saving £166 a month," says Steve Laird. "After the wedding, the money can be put towards the holiday, which they may be able to take next year.

But their longer-term aim to save £10,000 by 2014 in preparation for starting a family is a little more challenging. They would have to find around £330 each on top of their existing savings commitments, and it won't last long once children come along. "The average cost of raising a child to 21 can be as high as £186,000, so Melanie's goal seems a little misplaced," warns Dennis Hall. "A child doesn't mean a one-off cost. Instead, it's a constant, ever-increasing drain on household income.

"Anything Melanie and her partner can do beforehand to reduce their monthly expenditure will have a greater impact on their financial well-being rather than trying to put aside a lump sum. Overpaying the mortgage will reduce the percentage of their income going toward housing costs, for example." And in the current financial climate Melanie may also be able to renegotiate some of the costs for her wedding, putting the cash towards her other savings plans.

"Melanie has a share scheme as well as a small savings scheme, which she should review to see how much these contribute towards her £10,000 goal," suggests Anna Sofat. "She may also wish to consider setting up a regular saving of £100 a month since she will need to increase her current level of saving if she wants to meet her 2014 goals."

But the couple should also ensure that their cash savings are earning as much interest as possible and are sheltered from income tax. "Melanie and her partner can shelter £3,600 each every year in a cash ISA," says Sofat, "They can earn gross interest of as much as 3.5 per cent or 4 per cent fixed for 12 months from Birmingham Midshires.

"They can also get a competitive rate of interest if she commits to saving £20-£250 a month. Barclays are currently paying 5.8 per cent on its monthly saver."

Pension

Melanie isn't doing badly on the pension front either, which is rare for someone her age. "Based on her current level of earnings, service to date, assuming her salary increases by 2.5 per cent every year and a 7 per cent investment return, Melanie should be on target to achieve a retirement income of £20,000 in today's money, plus a tax-free lump sum," Laird notes. "If she takes time off to have a family and reduce her hours, this would have a detrimental effect on her pension pot. But there is enough scope to make up any shortfall without it being too expensive for her."

But Sofat warns that,as a cautious investor, Melanie needs to be aware of the risk associated with her pension savings. "As this is a money-purchase scheme, the investment returns could have a big impact on her eventual pension," she says. "Melanie should ensure that the pension funds she is invested in are reviewed regularly. Despite her cautious attitude to risk, at her age she should be thinking about mostly investing in equities."

Protection

Melanie is also ahead of the crowd when it comes to protecting her lifestyle. She has income protection, which will pay a proportion of her bills if she is unable to work through an injury or illness, until the point of retirement if necessary. She should review her payments, because at her age she could get an annual benefit of £19,500 to the age of 60 for £33.28 per month.

Meanwhile, her critical illness could also be regularly reviewed, and both Melanie and her partner should be clear about what their policies cover as the conditions included vary between policies.

For a free financial check-up, write to Wealth Check, The Independent, 191 Marsh Wall, London E14 9RS; or email wealthcheck@independent.co.uk

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

PROMOTED VIDEO
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

    Austen Lloyd: Company Secretary

    Excellent Package: Austen Lloyd: EAST ANGLIA - SENIOR SOLICITOR LEVEL ROLE** -...

    Citifocus Ltd: German Speaking Client Specialist

    £Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...

    Citifocus Ltd: Performance & Risk Oversight

    £Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...

    h2 Recruit Ltd: Sales Director - SaaS (SME/Channel) - £140,000 OTE

    £90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...

    Day In a Page

    Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

    Christmas Appeal

    Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
    Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

    Is it always right to try to prolong life?

    Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
    Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

    What does it take for women to get to the top?

    Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
    Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

    Knitting pretty: British Christmas Jumpers

    Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
    French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

    French chefs campaign against bullying

    A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
    Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

    Just what you need on a New Year hangover...

    Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
    Cuba set to stage its first US musical in 50 years

    Cuba to stage first US musical in 50 years

    Claire Allfree finds out if the new production of Rent will hit the right note in Havana
    Christmas 2014: 10 best educational toys

    Learn and play: 10 best educational toys

    Of course you want them to have fun, but even better if they can learn at the same time
    Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

    Paul Scholes column

    I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
    Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

    Lewis Moody: Lancaster has made all the right calls – now England must deliver

    So what must the red-rose do differently? They have to take the points on offer 
    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
    Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

    Sol Campbell cries foul at Labour's mansion tax

    The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
    Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

    Sarkozy returns

    The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
    Is the criticism of Ed Miliband a coded form of anti-Semitism?

    Is the criticism of Miliband anti-Semitic?

    Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
    Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

    Ouija boards are the must-have festive gift

    Simon Usborne explores the appeal - and mysteries - of a century-old parlour game