23, teacher- advice needed on where to put money?

skipinoz88

Hi there,

I am 23 and just started working last September. My parents earn very little, so I received bursaries and grants from the student loans company and the university I attended- this means that I effectively broke even over the past five years (degree and teacher training) with the help of weekend and summer jobs. I have a student debt of 21,000, but also that amount in cash in my bank account with about 12,000 of it in cash Isa's built up over the past 4 years.

I already put money into a pension in the teachers scheme, but am very unsure what to do with the rest of it, and the £1000 a month I can save from my paycheck.

I am really looking for advice on what I should do with it. My aims are simply to increase the amount, with the view to maybe having enough for a deposit on a house in the next 2-5 years. I have thought about stocks and shares ISA's, premium bonds or maybe even the stock market(i would obviously do a lot of research here and am not averse to risk), but would really appreciate some advice from anybody who has been in this type of situation before.

many thanks for reading
Best wishes

bigadaj

Make sure that as much of your cash is in isas as possible.

The timespan you mention is normally too short to recommend going into shares, so the normal advice would be to save as hard as you can in cash.

The one thing that I can think of with shares in you position is that equity income, or rather the yields on large shares, are very high currently, so if you look at that as interest, then they are giving you 5 per cent or more currently, with the potential for capital growth, or loss depending on how you look at it.

skipinoz88

many thanks for your advice, I will look into it.

calypso_rhapsody

read what MSE has to say about premium bonds and i think you will strike them off your list.

conventionally 2-5 years would be regarded as too short a timescale for equities but there may well be a case for putting some of your annual savings into a S&S ISA invested in lower risk, higher yield shares - but do your research and realise that you might find that when you want the money for your house deposit then the time might not be right to be selling S&Ss.

Depends how much of a risk you are willing to take!

atush

I agree with all the above, 2 years is far too short and you should use cash only. Your pension is good too. Fill you cahs ISA each year and use a regular saver for good interest int he meantime plus easy access accts.

But if it will be 5 years you could think about equities for a small portion of your savings each month. I would drip feed it into funds or good dividend paying shares such as but not limited to Vodaphone and Glaxo. Or perhaps into a good global investment trust via their savings plan. If you are saving 1000 per month, I can see you easily being able to put 100/m or so away this route and the other 900or less into cash.

skipinoz88

Again, thank you for taking the time to post. I like your suggestion of drip feeding and that way not taking all the risk at once.

how do you go about investing in these companies, can you do it through your bank?

xylophone

Make sure that you are earning as much interest as possible on your ISAs - transfer if not, remembering that you must ask the institution to which you want to transfer to arrange the transfer. If you are thinking in terms of two years then you might consider a two year fixed rate for your existing £12000. Read this and look at other comparison sites as well.http://www.moneysavingexpert.com/savings/best-cash-isa
Open another cash Isa as soon as possible in the new tax year (6 April) - there are usually good offers at the start of the ISA season. You can invest £5640.

Put the remaining £3360 into a high interest on-line account and regard this as your emergency money.http://www.thisismoney.co.uk/money/saving/article-1583859/Best-savings-rates-Internet-branch-50s-savings-accounts.html

Now you can consider drip feeding a regular amount from your salary into a stocks and shares ISA.If you are investing in funds, it is usually cheaper to invest via a discount broker. Personally, I like Invesco Perpetual Distribution Fund Acc units with tax credits automatically re-invested as a beginner's fund bur other people will have other ideas.

Try here for information http://www.hl.co.uk/ which may assist and do some background reading on saving and investing.
http://www.which.co.uk/money/savings-and-investments/guides/the-beginners-guide-to-investment/

Wobblydeb

Do your student loans attract interest, and if so, at what rate?

Derivative

Wobblydeb wrote: »

Do your student loans attract interest, and if so, at what rate?

1998-2011 loans for full time students are 1.5%, so it's better to keep the cash in ISA's (net gain of about 1.5% per year for instant access, 3% per year for fixed rate)

skipinoz88

thankyou for the reply xylo,

I have only just realised that you are able to transfer money from old ISA's into new ones that attract better interest. My fault for not researching this properly. Many thanks for making me aware of this.

I think the two year fixed term ISA looks very good - Is it possible to transfer all the money from the old ISA's into this or do I have to open multiple accounts with the limit of 5000 on each.

best wishes

Linton

skipinoz88 wrote: »

.....
I think the two year fixed term ISA looks very good - Is it possible to transfer all the money from the old ISA's into this or do I have to open multiple accounts with the limit of 5000 on each.

You transfer money from old ISA's. If they are from previous years it wont affect your current year's entitlement.

To do it you tell the receiving provider the details of the ISAs that you want transfered in and they will sort everything out. You DO NOT take the money out of the old ISAs planning to put it in yourself to the new one - it doesnt work.