Serious Advice needed.

Planeman_2

Can anybody offer me advice on the following.
After 4 1/2 years my son has finally received a settlement in the order of £100,000 following a very serious road traffic accident just as he finished university.
Given the current financial climate ( uncertain interest rates / failing banks and institutions / £50,000 safe maximum etc) I am trying to help him save / invest wisely, so should we:
1. Pay off his student loan?
2. Put money in 2 seperate saving institutions (£50,000) with best possible rates?
3. Invest?
4. See a financial advisor?

Your advice would be much appreciated.

MyLastFiver

Depends on his plans for the future. Putting it in savings accounts would give modest but safe returns, whereas investing should be considered a medium/long term plan, the reward for which is potentially higher returns.

This is not advice, just an opinion of what I would do: I would consider going into property (I'm assuing your son doesn't already own property). In the current market, your son is in a rare and luxurious position as he has a substantial cash downpayment. Mortgage providers and sellers will love him, and 2009 will be the best year in a generation to buy. Hell - up here in Yorkshire he would be able to buy a place outright for cash. Imagine your son starting out in the world mortgage-free. There's a lot to be said for the quality of life, and peace of mind, that can bring.

ed123_2

...this is what I would do.....£45k in Anglo Irish 1 year 5%, £45k in ICICI 1 year 5.1%,(some rate these two poorly however AI has been pratically nationalised & ICICI has good capital reseaves) balance in cash isa & instant account. Buy a property beginning of 2010.....this is only my opinion....a lot of other factors...job, company pension scheme...etc etc...btw paying off the student loan would be low on my prioritises.

Lokolo

I wouldn't buy yet, theres still a lot of time for the market to fall.

I would only advise getting a house if he is in a secure job so he can afford to make mortgage payments.

I would save it for a couple of years.

lcharm

Planeman wrote: »

Can anybody offer me advice on the following.
After 4 1/2 years my son has finally received a settlement in the order of £100,000 following a very serious road traffic accident just as he finished university.
Given the current financial climate ( uncertain interest rates / failing banks and institutions / £50,000 safe maximum etc) I am trying to help him save / invest wisely, so should we:
1. Pay off his student loan?
2. Put money in 2 seperate saving institutions (£50,000) with best possible rates?
3. Invest?
4. See a financial advisor?

Your advice would be much appreciated.

To be honest you already sound like you have the right idea!! Although a Financial Advisor is a good idea not worth the money as your son hasn't really got any assets yet despite being moderately cash rich now.

I'd recommend asking your son what his plans are for the next 5 years to ascertain what to do with the money rather than throwing the ideas at him. That's what an IFA would do anyway but they'd charge you!

General rule of thumb though is to have a nice spread of short term and medium termed investments includign a nice high interest savings account

Oh but do pay off that student loan and any other debts! Also make sure if you choose 2 savings accounts that they don't fall under the same umbrella company as you will only be covered £50k in total and not each

anniecave

I wouldn't pay off the student loan - unless it is definately at a higher rate of interest than you could get investing/saving the same money.

lcharm

A good debt is no debt regardless of interest rates, you never know how circumstances change in the future

Planeman_2

Many thanks to you all for the advice and opinions.
Just to give you all some feedback, we had a chat about it and with his current situation he has a large student loan running at 3.8 - 4.5% and is adamant that he wants this paid off so that it does not 'bite' him later.

Like many we believe the housing market has further to fall yet so will be putting the cash somewhere safe for the time being (one year term saving).

As he is also unemployed at present (archaeologist) so he could also benefit from gross interest. Yes, we will make sure that the money is split and NOT under the same umbralla institution. We also checked out ICICI which although India is covered by the FSA compensation scheme (is there a problem with this).

Hope you all think we are covering the angles on this and MANY MANY thanks to you all (but happy to listen more!)

Regards, Planeman (and son)

housesitter

I left uni with my student loans unspent, but in savings accounts.
I figure that's a similar enough situation to having this payout on hand to be able to pay them back.
I think it's the wrong idea.

It's by far the cheapest borrowing you'll ever get other than a mortgage.
They will pay themselves off if you don't spend it, but leave a corresponding amount in a savings account (pick the right one) to pay the interest, plus you will have the capital left at the end.

Think of it as an enforced savings plan, but with the option that you already have the capital so can change your mind on what to do at any time.


You don't mention any long term injuries? Maybe not affecting him now, but 20years down the line may they cause problems?
I assume he's not the Indian Jones type of archaeologist?

Planeman_2

Housesitter, Many thanks that's an interesting take on the problem and one we had not considered from that angle. Yes he will have some long term problems later on (no he is not I.J. type!) and we have also considered the implication of that so for now he needs to make the best of his savings.
Many thanks.

Myrmidon_J

Planeman wrote: »

Can anybody offer me advice on the following.

After 4 1/2 years my son has finally received a settlement in the order of £100,000 following a very serious road traffic accident just as he finished university.

Given the current financial climate (uncertain interest rates / failing banks and institutions / £50,000 safe maximum etc) I am trying to help him save / invest wisely, so should we...

I would first point out that this is not advice; it is merely my considered opinion. If you are seeking financial advice, then contact an adviser!

In any case, "the right thing to do" may vary considerably, so the first thing to do is to analyse your son's circumstances.

If he was unfortunate enough to be involved in a serious traffic accident, does he need ongoing medical treatment?

If your son is unemployed, what does his basic budget look like? How much is left at the end of each month? Is there the potential to undertake further training or pursue a postgraduate qualification?

Property: may fall further (probably), may not. But if your son is thinking of buying a first house, it is likely to be less affected by volatility in the market. Besides which, market prices are only relevant to the extent that they mirror 'real' prices - i.e. if you can get a good place at a good price, does it matter that it 'loses' £7,500 in the next year?

Regarding the student loan: although the rate looks (relatively) high at present, I believe that it is linked to the rate of inflation. Therefore, it is (almost) free money. I have a student loan myself, but don't intend to pay it back before I have to!

Of course, if your son wants to clear his debts - that is for him to decide! His decision is ultimately the right one.

Hope this is useful.