There are lots of ways to start building a savings plan. For us, at this point in our lives and in these circumstances, these savings fall into two categories.
The first comprises a series of small savings accounts that are planned to cover everyday, relatively predictable expenses. These include:
- car maintenance (namely the annual MoT for both cars)
- School stuff (uniform plus the constant stream of requests for everything from sponsorship, trips, non-uniform days etc)
- Kids clothes and shoes: My kids are aged 5 and 2 so not much fits from one year to the next, they are growing so fast! They seem to need 2-3 pairs of shoes each year depending growth. They usually only have one pair of shoes that fits at a time though my eldest will probably also have a pair of non-school shoes to wear over summer. This fund does not include trainers needed for school etc.
- Gifts: This includes birthday parties for the kids, presents, anything for Christmas etc. We have a huuuuuuuge list (still!) of people that we buy for at Birthdays and Christmas. I’ve tried valiantly to cut this back but to little avail. Or rather I did quite well cutting back to mostly just buying for children in the family and of close friends instead of adults. At the same time, however, my eldest started school and everyone seems to have huge class parties so we end up buying an extra 10-15 or so gifts a year just on that! I digress…
There are other small accounts but these are the main ones. They are defined by the fact that they are for predictable expenses. Things like school uniform, birthdays, kids growing and needing new clothes and shoes, Christmas, school holidays, MoTs…they should come as no surprise.They rock around at the same time each year and it is very wearying to end up in a panic over the same things year in year out. My advice, should anyone want it, is make like a tortoise. Slow and steady wins the race.
Then there is the second category of saving – the big stuff. Or, in our case, the stuff that is beyond the very basics (and yes I do count birthday and Christmas presents for my kids as basics. We’re not on the poverty line. And, from the other end of the spectrum, they don’t expect/receive ponies and unicorns either). In my mind there are 3 or 4 things I would like to save up for, namely:
- A holiday: A real one. I haven’t set foot on foreign soil since 2009. This is WITHOUT QUESTION the thing I miss about having more money.
- A decent mini emergency fund of 500 pounds. We managed this briefly a month or so ago but then Husband didn’t get paid that much one month and it more or less got cleaned out again. Sigh.
- A big fat savings account. Yep. I want one of those. Not because I’m a giant money grabbing ho-bag but because I’m am soooo sick of living so close to the edge. I want to be as close to financial independence as possible. I’ve had to turn down several different opportunities in the last few years because I didn’t have the savings to bridge gaps etc. Plus the worry is fairly awful at times. And I’m not getting any younger and have nothing sorted out for retirement (though I will do more on this once both children are in full time education and I can take on more paid work. But still).
- Renovations: We got our house at a low price because it needed a lot of work doing on it and the elderly owner didn’t want the bother of doing it just to sell. We did a few major things just after we moved in (before bub 2) and then it all ground to a halt due to lack of time and money. We’re not talking a few scatter cushions – things need to happen. I think this is a case of having to save a little bit here and there and seeing quite how much we can do with pure elbow grease / no budget!
For me (the household financial planner) it makes sense to have these two categories of spending. The savings funds in the first category are non-negotiable. Just because they don’t go to a third party by direct debit doesn’t mean that they aren’t essentials or should be treated as ‘raidable’ pots. Unless you can easily pay for new school shoes or a new car battery then this money has to be treated with the same reverence (I confess I have raided the car account upon occasion but only in a pinch and it has always been replaced within a month or so!).
The second category covers the extras. Some people would probably argue that general savings should come under essentials. In an ideal world they would be right. But sometimes you’ve got to pay for the car to be fixed and replenish the empty fridge or whatever it might be. Holidays are a luxury and one I’m very keen on having (and being able to provide for my children). And I’m also the kind that enjoys a comfortable, attractive home. So these are the areas that I have chosen to focus our efforts on. Now it’s just a question of where to find the money to fund all of these grand plans!