As a student, what do I do with an unexpected inheritance?

TJ11

Hi,
I'm a university student receiving full financial support and am in the unusual position of having saved up around £10,000. I'm now also about to receive around £20,000 in inheritance and I'm not sure what to do with all of this money. Do I invest it? Do I split it into several savings accounts? Will this affect my student finance?

I don't have a regular income or any direct debits coming out of my main student account as I am paid in 3 blocks a year and also pay rent and bills in this way, so wouldn't qualify for a normal bank account. Also I don't really want to keep feeding it into one and shuffling it around every month. Should I get a Help to Buy ISA?

Is there a way I can sensibly put at least the majority of this money into one or two places and just let it grow while I'm studying?

Dan83

Do with it as you please, do you want to invest it? Save it? Or put it into a help to buy isa?

When you decide, ask the question again and people might be able to advise the best way to go about it.

TJ11

Well that is my question, what should I do with it?

colsten

TJ11 wrote: »

Well that is my question, what should I do with it?

What you actually do with it depends entirely on what you want to do you it.

What is is you want to do?

If you can control your 'wants' -

You might want to put some of your money in a longer term savings/investment account.

You might want to pay off any debts you might have.

xylophone

You want to buy a house in due course?

Currently you do have DDs? Any "cash back " type?

http://www.santander.co.uk/uk/index

You could possibly open a HTB with Santander (4%) and a 123 current account (3% on up to £20,000) , and a monthly saver account.

You fund the account by transfer (and back again) from your existing current account.

Next year you might look at LISA. http://www.moneysavingexpert.com/savings/lifetime-ISAs

There are easy access savings accounts

http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

colsten

TJ11 wrote: »

Well that is my question, what should I do with it?

I presume the very last thing you should do with your money is putting it somewhere that one or more anonymous posters on MSE suggest you should put it into.


I wouldn't commit any of my funds to what I have read on an internet forum, not even if that forum was MSE. No forum, not even MSE, will give you any guarantee for your investment

Flobberchops

If I had been in the position, and had the foresight, to start saving for a mortgage when I was in university I'd be a much happier person now! Likewise I understand that it's good practice to start thinking about (and contributing to) your pension early if you have the means.

It comes down to your future plans though. Whats important to you? Saving for a house/car? A steady stream of passive income? Retiring at 50? Millionaire or bust?

As a very rough guide I'd suggest allocating money between:
- An instantly-accessible sum of money for everyday spending. Current account.
- An easy access "buffer" for unexpected bills and expenses. Current or savings account,
- An emergency fund of several thousand for "oh s**t" scenarios. E.g. an admin error means your Student Loan payment comes two months late, or you need to change where you're living in a hurry, etc. Current, savings or cash ISA account.
- Money earmarked for graduation. I.e. it could be tied up for now but you'll require access to it in 1/2/3 years. Your choice of interest-paying account or short-term investment.
- House fund: Assuming you plan on being a homeowner one day. A Help to Buy ISA would be ideal for this, and keep an eye out for the Lifestyle ISAs being introduced in 2017.
- Some kind of investment: money you're willing to put away for 10+ years for growth and/or shorter term investments with an element of risk such as P2P lending. A Stocks and Shares ISA would be ideal for the former and an upcoming Innovative Finance ISA for the latter.

Please do your own research though and think long and hard about what your plan is for the next 5-10 years. Even if it's just a pencilled-in plan that's inevitably going to change; failure to plan is planning to fail.

TJ11

Thanks for the advice xylophone. To clear it all up, this is what I want: to save this money somewhere so that it will be safe and make at least a bit extra in interest, seeing as I don't currently need to use it and would be better off putting it towards my future. This is why I am interested in the HTB - 4% interest, 0 tax and a potential bonus towards a deposit on a house, but I could fill it up with the monthly maximums and still have over £20,000 left! The Santander 123 looks like a good option too, although I do have their student 123 so would that be a problem? I was also looking at the M&S and First direct accounts as their regular savers seem to be 6%.

And yes, I've looked into the LISA for next year but need to do something in the meantime!

I have no current debts apart from student loans, but these come slowly out of your salary after graduating and I don't need to pay these off right now. I have nothing coming in or out of my account each month, just the the three-times a year instalments of student finance and payments of rent and utilities that follow. However, I'd be happy to set up a couple of direct debits through if that meant qualifying for a better account/one where my money makes interest and doesn't just sit there doing nothing.

TJ11

And also thanks flobberchops, what you've written looks very helpful!

Pincher

TJ11 wrote: »

Will this affect my student finance?

Your bursary/grant/scholarship should have some Terms and Conditions.


My MSc was funded by a scheme where they paid the unemployed the rent and benefits (called Job Seeker's Allowance these days), but I attended university instead of signing on. As supplementary benefit was means tested, I could have lost the lot if I had inherited £20,000. Assuming I declared it, of course. Once I started on the course, nobody asked: and I didn't inherit £20,000.


It was meant for vocational courses like catering, plumbing, etc. but for two years, it included higher education.

TJ11 wrote: »

I don't have a regular income or any direct debits coming out of my main student account as I am paid in 3 blocks a year and also pay rent and bills in this way, so wouldn't qualify for a normal bank account.

I think you are underestimating the power of the student card. They wouldn't demand all these things for a STUDENT account.

Lingua

I'm a uni student in a similar situation with some money saved away, though no inheritance windfall on my part. You are indeed able to qualify for a normal bank account - my advice would be to open the Nationwide 5% Flexdirect account, 2x 3% Tesco current accounts and a 5% TSB plus account. Together, these will provide a net interest of 3.86% on a balance of 10.5k (with the gross interest being £405/yr).

On top of this you could then have the monthly savers from nationwide and TSB, using drip-feeding from high-interest current accounts into high-interest monthly savers and earn even more interest.

Of course, all of this leaves you with around 20k, and for that my advice would be the Santander 123 account. Not sure if you can get this as you have the student account (which incidentally pays 3% on balance between £300 and £2000, so there's some more interest). The £5 monthly fee can be a lot, but you could always use that account for bills and get cashback to offset that, and the interest earned would be far more than the £60/yr charge.

There are a few other current accounts available with high interest rates, but I'm not too familiar with them at present. It should also be noted that some current accounts require a certain amount of income per month, so you can set up a 'merry-go-round' of funds between the accounts to meet this. Secondly, some accounts need a minimum # of direct debits. I have found, though not tested, that some charities have no minimum DD. Essentially, you can donate 1p and register a DD.

And finally: once high-interest current accounts are used up, I'd suggest the HtB ISA (although this only allows for an initial £1200 in savings then £200 a month, so you'd have cash lying around earning a lot less for a while), or if you're ok with the risk a IFISA (Innovative Finance ISA) in the short term for 1/2 years while you finish uni so that the money will be available when you graduate. The longer durations (5-7 years?) pay better interest, but no doubt you'll be wanting access to the money at some point in the near future for setting up a home and the like.

I've probably missed something out (it's very late), but if you need any more info I'm happy to help!


Lingua

EDIT: Quick thought - you could open several monthly savers with other banks (i.e. the First Direct 6% linked saver you mention) and drip-feed money into those too, possibly from a current account that offers a lower interest rate but on a larger balance (similar to the Santander 123 if you cannot get it).