Save or pay debt on interest free

citymodel

I've just started earning grown up money after 7 years of university. I want to save but can only afford a little £10-20 PCM to start with.
I am also paying off £50 PCM on a student overdraft. I'm nearly sure this is interest free but would need to double check. I have paid off my credit card.
I'm not sure if I should save and to where as it won't be much. I've read the article on paying off debt vs saving but I couldn't work out what applied here. My family are really bad with money and I don't want to be but I don't know how to use money properly!
Should I get a pension instead? I'm 26 and think its a bit early and my mum is turning 60 and he pension is way too little to retire, if she did she would loose her house so I don't know what she's going to do in 10 years. I'm not sure I trust the idea of a pension as it seems to fail people. Is there a better place I can put money? I don't believe there will be a state pension when I'm 70!

Also I do feel I need the buffer of a little bit of savings as i don't have anywhere to turn for a lump sum if required. Also I have a very bad credit rating if that is relevant.

Sorry not sure if that makes sense! Basically where do I put this £20 PCM?

HappyMJ

SAVE!!!...

Pension? No not yet. Use your full ISA allowance first then consider pension savings. Why? You don't get access to your pension savings until you retire. The savings in an ISA can be cashed out if for instance you wanted to buy a house and by having a bigger deposit it reduces the interest rate you pay on any mortgage.

Many others would advise pension savings as early as possible but I think you need to be working a few years first and have a mortgage to take full advantage. Save into a pension when you have the money to be able to afford it and have no immediate need for the money in the near future. No point saving in a pension and then having to use a credit card charging 24.9% to make ends meet.

Memory_Girl

Well done for getting so clued up so young ... it will stand you in great stead later.

So .. you have the time and the luxury of taking this one step at a time.

SAVE!! As quickly as you can get £500 tucked away as a baby emergency fund.

Then start to pay down your debts ...., when you get debt free you can up your savings to 3-6 months of expenses in an ISA and then look again.

Then might be the time to look at houses and pensions and so on - but get a solid debt free foundation under you first hon ... it will save a lot of sleepless nights.

MG

Swampy3k

The posters above say it all really, in life it always helps to have a small emergency fund as you just never know when things can go wrong, after that you can just put it towards your debt or if it is 0% you could look at saving it in a seperate pot and letting it grow interest until you have the full amount you can pay back to the uni in one lump sum.

TrustyOven

citymodel wrote: »

I've just started earning grown up money after 7 years of university. I want to save but can only afford a little £10-20 PCM to start with.

Please fill in the SOA and post it in this thread.

http://www.stoozing.com/calculator/soa.php

That you only have £20 after bills is a bit confusing since you don't mention any other debts other than student loan (the SLC student loan?), so it would be important to post an accurate SOA so we can help you further.

Archi_Bald

HappyMJ wrote: »

SAVE!!!...

Pension? No not yet. Use your full ISA allowance first then consider pension savings. Why? You don't get access to your pension savings until you retire. The savings in an ISA can be cashed out if for instance you wanted to buy a house and by having a bigger deposit it reduces the interest rate you pay on any mortgage.

Sorry, disagree. Firstly, saving into a cash ISA is just a waste of time right now as you can get a lot better interest elsewhere. If you are talking less than £15K annual contribution (and we are here) the best place for cash savings are current accounts, e.g. TSB Plus.

But on the pensions v cash debate: yes, you need some readily accessible cash. But yes, you also need a pension eventually, and the earlier you start building your pension pot, the better. If you are employed, your employer pays part of the overall contribution, and the more you contribute, the more they will pay.

So it is not a question of either or. Instead both, cash and pensions should be fed each month.

OP: even if there is a state pension when you come to retirement, you can be rather certain that it would be a totally miserable existence if it was the only money you would get each month. You do need to make your own provisions for your retirement.

ViolaLass

citymodel wrote: »

Should I get a pension instead? I'm 26 and think its a bit early and my mum is turning 60 and he pension is way too little to retire, if she did she would loose her house so I don't know what she's going to do in 10 years. I'm not sure I trust the idea of a pension as it seems to fail people. Is there a better place I can put money? I don't believe there will be a state pension when I'm 70!

At your age, you do want to start a pension ASAP but emergency savings are vital first. I would save the money for now then, once you have that emergency fund sorted, pay the overdraft off.

Your mum would lose her house if she retired? If you're going to use that to colour your view of pensions then you need to understand why that's happening. Do you know?

katejo

HappyMJ wrote: »

SAVE!!!...

Pension? No not yet. Use your full ISA allowance first then consider pension savings. Why? You don't get access to your pension savings until you retire. The savings in an ISA can be cashed out if for instance you wanted to buy a house and by having a bigger deposit it reduces the interest rate you pay on any mortgage.

Many others would advise pension savings as early as possible but I think you need to be working a few years first and have a mortgage to take full advantage. Save into a pension when you have the money to be able to afford it and have no immediate need for the money in the near future. No point saving in a pension and then having to use a credit card charging 24.9% to make ends meet.

Personally I am glad that I took my Dad's advice and started paying into the pension at 27. I suspect that most who say "i will do it when I can afford it" never will. I only spend on the credit card what I can afford to pay off.

MrGreen

I'd say one step at a time, save a starter emergency fund as others have mentioned, I'd say £500 to £1,000 to cover anything unexpected in the short term and to stop you from taking on more debt.

Then look at your debts and plan to pay them off.

If your company matches what you put into your pension then start with what you can afford and get into the habit of putting this money away and not really thinking about it as it very long term saving!

citymodel

Thanks everyone.
My employer won't help with anything he says as a very small company they don't need to offer a pension beyond national insurance. Is that true? There are only 3/4 people in the company.

Lol at baby and house fund! Ha no babies for the next 8 years at least and I know that me and the bf won't ever afford a mortgage so there is no point in even thinking about that.

I'm not sure I believe in home ownership (I'd rather find a way to pay rent where it would go back in to the housing stock for the less fortunate/ upkeep of the housing etc but that's the slightly socialist architect in me) and I am just graduated so babies aren't for me (I'm happy for other people who want them) so let's set those two aside for a bit.

I like the idea of a small pot of money for emergencies like the £500-1000 many of you mentioned.
Where should I put that? I would like to access it at any time in need be but I don't want it to be like in my nationwide savings account on my phone app where it's FAR too easy to get it back out in an instant. I do want to save but I know my will power is bad. So maybe it would be good if it was a different bank that I don't keep my salary in (ie not nationwide)? Who would be best?

Or would a nisa be better?

It is defs going to be like £20 PCM. I have worked this out with all other debts and bills and cost of living in London.

Next year i should have more maybe £50 once I pay off my bike on the cycle to work scheme.

double_mummy

i think they meant baby as in a small start for your emergency fund not in case you have a baby lol