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(Relatively) small scale savings

Discussion in 'Teaching abroad' started by miranda-s, Feb 1, 2020.

  1. miranda-s

    miranda-s Occasional commenter

    I know there has been discussion on savings before, so I know about Andrew Hallam's book and about the varying opinions of buying property, getting into stocks and shares, etc, but all of the threads I've seen have seemed to assume that people have a large amount of savings. What about people whose savings are not in the property-buying league?

    Let's say you can save the equivalent of £500-£1000 a month - that's still a good chunk of money at the end of a year, but it's going to take a while to build up enough for a property investment. What if you have no desire to spend time watching the stock market and deciding when to buy/sell shares? Or you don't want to risk losing any of your money, even if that means not earning a great deal of interest on it either? What do those of us with more modest savings do with it?
  2. taiyah

    taiyah Occasional commenter

    You pose a very good question.

    I was saving that much when I was in London and bought (in East London) as soon as I had enough for a deposit. Terraces back then were going for £220-250k, expensive at the time. I was in my mid 20s and not a bone of interest in the stock market. I know prices have skyrocketed but my point is you've got to start somewhere. Saving for a property deposit became a priority.

    I don't know Andrew's book but you are correct, he had money to start with... A good chunk.

    Your main priority is to avoid being that 50+ year old whose only option is head to an Eastern European country because they can't afford to buy a place back home (UK) and stretching their pension and savings is a must.

    I have several colleagues who squandered their money. In their 50s, relying on Andrew's book to miraculously give them the money they need to buy their first house AND boost their pension that cannot support them past 70.
    SPC2 and 24hours like this.
  3. Duraz

    Duraz New commenter

    If you want to work abroad you will have to take responsibility for your own investments and retirement income. This will involve taking on a certain degree of risk and putting some thought into it.

    Putting money into a savings account won't really get you anywhere so the two main options are shares or property. Investing in shares is probably easier than you think and can be done more cheaply and with less capital than you think. For example, have a look at exchange-traded funds (ETFs) which can be invested in with minimal fuss through websites such as Hargreaves Lansdown.
    576 likes this.
  4. lucyrose50

    lucyrose50 Occasional commenter

    Saving to buy a property in the UK while living in the UK is totally different, because all you need is enough deposit to get a mortgage. It's difficult to get a mortgage as an expat, or at least one that doesn't have interest rates that are so high it means it's not a good investment. Even if you are saving to eventually buy a property without a mortgage, what do you do with the savings as they build up?
  5. sid1913

    sid1913 New commenter

    Saving 10k a year like you suggest is not a small amount. They'll only be a small fraction of the UK that can do that.

    WIth regards to saving, saving for a house or investing in index funds is a little much of a much of a muchness. Do either and it's relatively the same. On those savings though it's hard to save AND invest in index funds.
    Helen-Back likes this.
  6. sid1913

    sid1913 New commenter

    You currently save more than me by the way and I'm in Asia. I'll be looking to save around 1500-2000/month on my next move and I'll be putting 50/50 between index funds and deposit. The deposit side of things just sits in my current account which I know is a bit daft but I worried that if I put it all into index funds and it was a slow or backwards decade, then it would drop.
  7. clovispoint

    clovispoint Occasional commenter

    What you are saving will build steadily into a significant sum, few teachers in the UK put that away every month. Have a play on the compound interest calculator here to see how it would grow- use a sensible rate of return 5-8% and see how it will grow over 20+ years.

    This video by Andrew Hallam is worth watching and working through. The amounts of money are staggering but you will get there if you plod away with saving and investing.

    It is possible to get a mortgage, multiple colleagues have used HSBC Expat. Interest rates are acceptable. Buy-to-let isn't as attractive as it was but, if you do your research, should still offer good returns. I just use index tracking ETFs, so far so good but then we have had very unusual growth over the last 10 years thanks to quantitative easing.
  8. Helen-Back

    Helen-Back Occasional commenter

    I'm going to tell you to do what you've already said you don't want to do and comment on some other replies. £10,000 a year is a decent amount. I would set up an offshore account (Internaxx / Interactive Brokers) and invest your money every three months to keep fees down. You mitigate the risk by investing in 40% bonds. Vanguard VBAL etf saves you the trouble of even thinking about this by investing 60/40% automatically. The whole point of this kind of portfolio is that you dont have to check it. It takes care of itself.

    The following comments are directed at the other posts.

    Andrew Hallam was a teacher on Vancouver Island. Pretty sure he didn't start with a lump sum. He saved hardcore and road his bike to work.

    If you can afford to live in Eastern European you can afford to live in a whole range of awesome exotic locations. I would not want to live in the UK again. No matter how much income you generate for retirement your disposable income is going to be larger not living in a terraced house in one of the most expensive cities in the world. Count me out. We were just looking at a fully furnished three bedroom pool villa on a tropical island for £150,000.

    If you choose not to save until you get into your 50s then you will have an uphill struggle however you invest. It's not Hallam specific.

    The slow or backward decade is the decade you pile as much cash into your plan as possible. That's ultimately where your growth comes from. Paying in regularly smooths out the bumps.
    TeacherMan2019 and gulfgolf like this.
  9. towncryer

    towncryer Lead commenter

    Just my opinion but be very cautious. I know people who have invested on the say so of financial advisors (one actually from the Search fair) and lost the lot.
    Just a regular amount into your current account will build up.It won't make any more money than you're putting in but it won't lose either.
  10. taiyah

    taiyah Occasional commenter

    Many of my younger colleagues are in this situation. To answer your question, they just save.

    True, the money they save is twice as much as the OP but again they have no interest in setting up off-shore accounts or the stock market because it's their only savings.

    "Difficult to get expat mortgages"
    Three of them got their expat mortgages easily because of the sizable deposit they had. Why? Because some had been saving since their university days. Not a huge sum. But didn't start on 0 when they hit the international circuit.

    Starting early and being aware is the key.
    Helen-Back likes this.
  11. Helen-Back

    Helen-Back Occasional commenter

    Don't go anywhere near financial advisors who come to your school or have booths at fairs or conferences. Sure you need to be careful, but better still, be informed.

    Just to add, I'm not anti investing in property, I just dont want the hassle of it. It works for some.
    TeacherMan2019 and clovispoint like this.
  12. miranda-s

    miranda-s Occasional commenter

    I don't want to suggest that I think saving £10k in a year is a small amount - it's far more than I was ever able to save when I was in the UK or when I was still burdened with student loan debts, and most of my friends back in the UK would be delighted to be able to save so much, so I'm definitely not taking it for granted. I just meant that the threads I've read on this board about savings have tended to focus on people who already have the sort of savings that they could buy a house outright with! I hadn't found anything for steadier and smaller saving, hence starting the new thread.

    I already rent out the house that I owned and lived in before moving abroad (still mortgaged) so I don't know whether I want to get into owning another property, and I also can't see myself wanting to go back to the UK any time soon, but I wouldn't have enough for a deposit for another few years anyway so that's a decision for further down the line. As someone who grew up poor, got through uni and PGCE only by racking up huge student debts (now paid off!) and has worked hard to get to a point where I have savings, the idea of taking risks with my money fills me with anxiety - I know that logically there are ways to invest which are low risk, especially if you're able to put it away for a longer time, but I'm really not sure about it. It's a pity that interest rates in bank accounts are so low.
    missmissmiss likes this.
  13. Helen-Back

    Helen-Back Occasional commenter

    I started from zero and I certainly didn't have cash to buy a house. The important thing is to start. I like what I do. Its low maintenance investing. Others like property. In the end you're investing for the future and that's what counts.
  14. nemo.

    nemo. Occasional commenter

    In UK property is massively overpriced and future capital appreciation will be limited as genx and especially millenials are screwed by the boomer gen. Also it is likely that the government, that just announced 5% cuts in all departments (rather quietly) due to Brexit expected slump in tax revenues, will take away buy to let tax advantages and the huge wealth stored in housing is too big a fat target.

    Having said that shares are also overvalued thanks to banana republic printing money by the west since 2008.

    Future expected returns are so low, I calculated that in the last 20 years a 40 year old has to save more than twice as much to buy the same retirement income at 65. This means genx and millenials have become massively poorer at the expense of boomers - who whine about avocado eating millenials - and ****** their future away more by voting for Brexit. Worse still millenials will need to emit only one eighth of the CO2 that boomers did in their life time to stop a planetary catastrophe so will also pay an environmental cost. Thanks selfish boomers!!!

    Conclusion is I save half of my salary in trackers and a couple of investment trusts, in the hope I wont starve in old age.

    As for a house the wife and I have property in Indonesia and I might buy one in Malaysia. UK stay away is my advice or wait to buy up North after millions lose their jobs thanks to Johnson!
  15. Helen-Back

    Helen-Back Occasional commenter

    Nobody knows what returns will be next year, let alone in 20 years. Pure speculation.

    Keep a fixed allocation of stocks and bonds, don't read the financial column and pay in regularly to use dollar cost averaging to your advantage.
    TeacherMan2019 likes this.
  16. clovispoint

    clovispoint Occasional commenter

    Holding cash seems good because it doesn't fluctuate, you can see what you have. However, you are accepting (almost certain risk) that your money will not keep up with inflation. To build your nest-egg you need to accept risk and accept there will be fluctuations. You can use a combination of bond and stock ETFs (or an ETF like VBAL that Helen-Back mentioned- going to look that up now!)

    We started out with less than nothing too. I am happy that we are on track but have plenty more saving and investing to do.
    TeacherMan2019, Helen-Back and 576 like this.
  17. miranda-s

    miranda-s Occasional commenter

    Thank you everyone, that's given me some things to think about and will hopefully be useful to anyone else in a similar situation.
  18. T0nyGT

    T0nyGT Lead commenter

    For all of the bashing that Europe gets, there are HUGE advantages to a comfortable state pension. We are in Greece at the moment and even though it's famously in a perpetually crappy fiscal position, the state pension for both of us combined with my UK state pension which I still contribute to will give us easily enough to live on as we will have paid our mortgage off by then.

    Sure, state pensions can go up and down, and maybe they'll even stop Class 2 contributions if Brexit goes to pot but all of this is all far more stable than the average independent investments.

    It's never going to easy any more though for any of us younger ones. The boomer days of buying a house for nothing and getting 7% interest rate on savings is long gone. If you're over 50 then you should be extremely grateful as you've had a financial walk in the park compared to the younger generations.
    HeroForTheDay and Helen-Back like this.
  19. Helen-Back

    Helen-Back Occasional commenter

    ......and pay your National Insurance contributions.
  20. makhnovite

    makhnovite Established commenter

    "Don't go anywhere near financial advisors who come to your school or have booths at fairs or conferences."

    Bit of a broad generalization there Helen. I met a guy some years ago at a school I was working in and since then he has become a close personal friend and the advice he has given has always been excellent and very, very, profitable. There is good and bad in every profession, especially teaching!!!!

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