Wealth Check: 'When will I be in a position to start a family?'
Saturday 24 January 2009
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."
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.
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...
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."
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."
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 email@example.com
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Presents unwrapped, turkey gobbled... it's time to relax
You'll need £220,000 for a minimum wage in your retirement
Why the City Watchdog is concerned with the credit card industry
Money Insider: Would £150 make you switch banks?
Bargain Hunter: Find the deals that have real value beneath the Black Friday hype
Gold-plated pensions – the key to retirement freedom?
- 1 Shia LaBeouf claims he was raped during #IAMSORRY art installation performance
- 2 This letter from a reader explains why women can’t play football
- 3 'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
- 4 Scientists predict green energy revolution after incredible new graphene discoveries
- 5 Michael Buerk wishes he killed Jimmy Savile when he had the chance - by pushing him overboard a cruise ship
Obama: The only people with the right to object to immigration are Native Americans
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
Ukip mocked after mistaking Westminster Cathedral – for a mosque
Plebgate: Andrew Mitchell’s reputation in tatters as judge rules he used the word ‘pleb’
iJobs Money & Business
Excellent Package: Austen Lloyd: EAST ANGLIA - SENIOR SOLICITOR LEVEL ROLE** -...
£Attractive Package: Citifocus Ltd: Prestigious asset management house seeks a...
£Negotiable: Citifocus Ltd: This is a varied role focusing on the firm's mutua...
£90000 - £140000 per annum + benefits: h2 Recruit Ltd: Are you a high achievin...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens