Saving and investing

Enough to cover the shock and the known spending, and the second half is the part people skip. The shock is an emergency fund, conventionally three to six months of essential outgoings, and for a household where one salary carries most of the mortgage it usually wants to be at the upper end of that. The known spending is anything you have already committed to within about five years: a deposit, a wedding, a car, a school fee. Money with a date on it does not belong in something that can be down 30% on that date. What is left after both is what you can genuinely invest.

Take the employer pension match before anything else, because an employer contribution is an immediate uplift no investment return is going to match. After the match it turns on your tax rate and how soon you need the money. Pension contributions get tax relief at your marginal rate, which makes them markedly better value for a higher-rate taxpayer, and in exchange the money is locked until the minimum pension age, which is 55 today and rises to 57 from April 2028. An ISA gives no relief going in and is reachable whenever you want it.

Less than the nominal figure, and the gap widens with the horizon rather than staying flat. A projection that shows a pot reaching six figures in twenty years is quoting future pounds, which buy less than today’s. This is why CrestCast shows real terms by default: the figures on the forecast are in today’s money unless you switch that off, so a rising line means you are actually getting richer rather than watching inflation restate the same purchasing power in larger numbers.

It depends on whether the same pound has a better home right now, and for a lot of households it does. A Junior ISA is tax-free and locked until the child turns 18, at which point it is legally theirs to spend on whatever they like. Your own ISA holds the same investments, is also tax-free, and keeps the money under your control, so it can pay for university, a car, a deposit or an emergency. The lock is the feature and the risk at the same time. The guide works through when the Junior ISA is the better answer anyway.

Yes, as accounts with a balance, a monthly contribution and a growth rate, and each one sits in the household balance sheet and is projected forward across the ten-year forecast. Growth rates are entered in real terms, so a pot with no growth rate stays flat in today’s money rather than drifting. A defined-contribution pension counts towards net worth by default. What it will not do is pick investments, recommend a fund, or tell you what return to assume.

That is a rule you can write once rather than a decision you re-make every payday. Set a minimum to hold in the current account, an order to draw on your pots if it dips below, and where a surplus should go. The forecast then obeys it for the whole ten years, which is what stops a projection showing a current account sinking for four years while a savings pot climbs beside it. Surplus cash routing covers how it works, and the flowchart covers what order to do things in before any of it.