Finished Uni and getting unexpected windfall. Best thing to do with it?

Andydroid

Hi everyone

I just finished uni and managed to get a job as a graduate structural engineer. I'm lucky enough that I had a sponsorship with the company I now work for during my time at university. This is money I thought I wouldn't get as there were some conditions attached and I didn't quite get the result needed to get the money but the university fought my corner for me and I am now getting a payment from the sponsorship.

So this week, I'm due to get my first proper pay packet in 5 years, should be around £1300. So not just measly minimum wage anymore from part time jobs that was just enough to pay the bills and nothing else

And I will also be getting a nice cheque for my sponsorship which will be about £2500.

I currently have a student overdraft which in total is £2000 but is still interest free for a year.

Should I pay off the overdraft? Or would it be wiser to lock the £2500 away and make interest on it and use that to pay off the overdraft when it starts to charge interest? Will the large balance of the overdraft affect my credit rating so badly that it would be better to pay it off to start improving my credit rating?

Also, I want to start saving a decent chunk of my monthly wage. I think £500 a month is a decent target per month so where's the best place to put that?

Any advice appreciated

JoeCrystal

Well done with finishing the uni and a job, you are already in better position than lot of people. Personally, if it was me, I would pay off the overdraft since it is still a debt and it is better to start with clean slate.

Considering you are going to be paying taxes, the best place may be Cash ISA and keep moving them around for best rate every year. Speaking of which, it may also be worth looking into starting a pension as well, especially if they contribute into it as well!

What with all this credit rating? Are you hoping to get a mortgage soon. Ideally, the best way is to save up the money for purchases (unless it is a house!). Please do not use credit cards!

Cheers

Joe

somethingcorporate

If you find a savings account that pays the equivalent interest of an overdraft please let us all know!

I would follow Joe's advice and clear the OD as soon as and start saving for real from there.

Andydroid

somethingcorporate wrote: »

If you find a savings account that pays the equivalent interest of an overdraft please let us all know!

I would follow Joe's advice and clear the OD as soon as and start saving for real from there.

The overdraft is interest free for a year. It's a graduate account.

Totton

Most students with debt have explained to me that the debt is very cheap, the only problem being that as their pay increases so does the amount they have to repay each month. I would keep the student loan on the basis that it is cheap and with an election looming the Govt may just wipe them all clear, well probably not likely but the possibility is tantalising!

Yep, I'd keep the cheap debt and pay it off only when it starts to get onerous.

System

There's no right or wrong answer. If it was me, I would clear overdraft and then start saving in a cash ISA (you are a taxpayer now).

System

Totton wrote: »

Most students with debt have explained to me that the debt is very cheap, the only problem being that as their pay increases so does the amount they have to repay each month. I would keep the student loan on the basis that it is cheap and with an election looming the Govt may just wipe them all clear, well probably not likely but the possibility is tantalising!

Yep, I'd keep the cheap debt and pay it off only when it starts to get onerous.

OP was referring to overdraft, not student loan.

jimjames

somethingcorporate wrote: »

If you find a savings account that pays the equivalent interest of an overdraft please let us all know!

I would follow Joe's advice and clear the OD as soon as and start saving for real from there.

I think at the moment pretty much all current and most savings accounts pay the same interest as his overdraft ie 0%!

I'd keep the overdraft until it charges interest and then pay it off with the money you have saved in a savings account or ISA.

CLAPTON

it makes sense to build up some savings before paying off 0% debt

so put the money in an instant access ISA, maybe santander at over 3% for 12 months if you are willing to brave their awful service reputation

once the OD becomes interest bearing then clear it

if you company offers a pension scheme with employer contribution then joint that too.