Recent Grad - First job - Need advise on savings + current accounts

Tomo8281

Hi all! Sorry if this is in the wrong section, but there is no 'generic advise for general banking' part, also the student forum is full of people complaining about student loans !

I'm a recent graduate (graduated summer this year, MSc), and I am one of the lucky ones to get a good first job quite quickly (Started 5th October). I'm looking for some advise on where to head to financially wise as its all terribly confusing. I've read a lot about it but would like to confirm a lot of facts.

Currently I have a Halifax student account with a 2750£ over draft. This really helped me through my student life but it was maxed out at graduation, its at -2000£ at the moment due to my first pay check taking a chunk out of it. I get £25,000 annually at the moment, normal tax code and nothing out of the ordinary (apart from student loan repayment... 96£ a month ouch [because I did my BEng and MSc at two different universities, technically I also graduated last year, so I've used my years grace on student loan repayments]).

Firstly I want to get out of this overdraft, which will take more than a few months I believe, but then I want to start saving a bit (say £100 a month) for holidays and general rainy days. I was thinking about a First Direct current account because of the great reputation they have and all my banking is done online now anyway, but I'm a bit stumped on a good savings account that I can dip into now and again. Interest rates are so low (first direct e-saver is 0.25%), I don't understand why its worth putting £100 into it every month as I'll get so little back.

Am I working out my savings wrong or something? Any tips?

Lokolo

I personally don't bother changing my current account unless I am unhappy with it.

As a tax payer you should use your ISA allowance (currently £5340), so find a decent one of those first and start. Don't just stick with the bank account you have an account with. Halifax do one for 2.6%. AA do one for 3.05%. etc.

JayBrun

I'm sure a number of posters will advise you and I hope you find their advice useful.

I'm certain you will have gained much from your studies and no doubt you will benefit substantially from your BEng and MSc and deserve to do so.

psychic_teabag

Does a student account have any special features for overdrafts ? I just had a quick look on Halifax site, and it seems to say that a student account comes with a 0% overdraft for duration of course and one year after graduation. So if you have a 0% overdraft, is there any reason to rush to pay it off ? Perhaps you could just put the money into a savings account (eg ISA), and use it to pay the overdraft off just before it starts charging interest.

Perhaps save it somewhere other than Halifax if the T&Cs allow them to pinch your savings to pay off the overdraft.

ses6jwg

I would concentrate on paying down the overdraft as my first priority. Look at reducing your outgoings to do this more quickly, look for cheaper car insurance, switch down a brand on your food shop etc.

Dont bother "stoozing" it, it damages your credit worthiness from personal experience.

Once you've got yourself back in the black, consider changing to a Reward Account paying you £5 pcm.

As a new taxpayer, ISAs should be your first priority.

Also, if your work offers a funded pension scheme, opt in immediately.

psychic_teabag

ses6jwg wrote: »

Dont bother "stoozing" it, it damages your credit worthiness from personal experience.

Oh, okay, didn't know about that. Is it sufficient to be seen to be paying something into it each month, even if not as fast as you possibly can ?

Tomo8281

psychic_teabag wrote: »

Is there any reason to rush to pay it off ? Perhaps you could just put the money into a savings account (eg ISA), and use it to pay the overdraft off just before it starts charging interest.

ses6jwg wrote: »

I would concentrate on paying down the overdraft as my first priority.

I agree with ses6. There are a couple of reasons I think for me to pay it off. Mainly, because I have no idea why halifax hasnt put interest on it yet anyway. As I did 2 seperate degrees (BEng and a MSc at a different university) I technically 'graduated' in 2010, and again in 2011. So I don't know why halifax hasnt started asking for the cash back, I've checked everything and I think they have just forgotton about me for the moment. So I'm taking that oppuninity to quickly get rid of it incase they wake up. Second reason is more ethical, I've lived with this haunting overdraft for the past 3 years. I really just want it to go so I can start seeing real money in my c/a instead of negative fake overdraft money.

ses6jwg wrote: »

As a new taxpayer, ISAs should be your first priority.

Why, as a new taxpayer, are ISAs a bigger priority? I know its a limited amount tax free but as a new tax payer why is it better for me than a person whos been paying tax for years?

ses6jwg wrote: »

Also, if your work offers a funded pension scheme, opt in immediately.

Done and done! Set that up as soon as I started (my company is very good with stuff like that). Company match it up to 6% as well (1:2 ratio), so I'm already paying a bit a month into it.

Thanks for the help so far, all I wanted was confirmation I'm not being silly. All I want is a c/a and a a s/a where I can put around 100 every month in to dip in now and again. So I'm thinking of staying with Halifax as they have given me really good service throughout my years and years being with them!

Lokolo_2

Tomo8281 wrote: »

Why, as a new taxpayer, are ISAs a bigger priority? I know its a limited amount tax free but as a new tax payer why is it better for me than a person whos been paying tax for years?

Because somebody who has already been a taxpayer for years, and has not put money into an ISA, has been effectively losing their tax-free savings allowance.

Since you are a new taxpayer, you have the opportunity to reap as much tax-free interest from day one! If you save into an ISA every year, you'll be pleasantly surprised at how much tax-free savings you've built up for yourself!

Tomo8281

Lokolo_2 wrote: »

Because somebody who has already been a taxpayer for years, and has not put money into an ISA, has been effectively losing their tax-free savings allowance.

Since you are a new taxpayer, you have the opportunity to reap as much tax-free interest from day one! If you save into an ISA every year, you'll be pleasantly surprised at how much tax-free savings you've built up for yourself!

Ahh good point, I'm still in the "short-term" mindset. So say if I set up a ISA (halifax) account now, can I put £100 a month (until the limit is reached) into a ISA and take bits out now and again, or should I use a regular online savings account for that and create an ISA account in a year or two when I have a 'lump' of money to put in a fixed account and leave it for a year?

jennifernil

The Halifax ISA Saver Online pays 2.6% at the moment, and gives easy access with unlimited withdrawals, so looks like a good account for you. If a better one comes along you can transfer. Note that you need to review annually as rates do drop after 12 months.

As an existing Halifax customer you will be able to open it very easily and quickly.

You might as well start benefitting from tax free interest now.

Once you have cleared your overdraft you could move to a Reward account.

atush

To pay off your OD early, try the debt free board. Post your SOA and the good folks there will help you cut down your outgoings. Keep a spending diary to see where you are wasting money, and put every amt spent no matter how small in it.