Graduate looking for Financial Options

Cg12396

Hello,

I am a graduate in my early 20s. I have just started a role in central London on a wage approx 30K/year. My wage covers my living costs enough that I am able to save a couple hundred a month.

I have also just come into £35,000 in an inheritance.

Any advice on how to use the £35,000?

Thanks in advance.

Terry_Towelling

Do you have any student debt to take into consideration?

Herbalus

Student debt is unlikely to be the best option for it at the moment.

Depending on where you see life taking you, it’s probably wise to consider whether this is a good start for a housing deposit.

First thing is to clear any overdrafts or credit cards, and then look at how to use the money. Have a look at the lifetime isa, and then the top savings accounts if you may need the money within the next 5 years. Otherwise stocks and shares isas (the isa part just means better tax treatment on your investments). MSE has some good guides on best buys in the links above.

tacpot12

Buying a house or flat is probably the best move - everyone needs somewhere to live. If you can buy a two bedroom house and have a lodger to help pay the mortgage, so much the better. There are tax incentives to do this.

You need to ensure you have Income Protection Insurance if you buy a property, and the mortgage lender will insist on life insurance.

Once this is in hand, split your spare cash three ways;
- pension
- overpaying the mortgage
- saving for big fun items such as holidays, fast cars, yachts, weddings or whatever else floats your boat!

Socajam

Herbalus wrote: »

Student debt is unlikely to be the best option for it at the moment.

Depending on where you see life taking you, it’s probably wise to consider whether this is a good start for a housing deposit.

First thing is to clear any overdrafts or credit cards, and then look at how to use the money. Have a look at the lifetime isa, and then the top savings accounts if you may need the money within the next 5 years. Otherwise stocks and shares isas (the isa part just means better tax treatment on your investments). MSE has some good guides on best buys in the links above.

So the guess is to hell with student loan. I have received mine and to hell with everyone else.
The least the OP could do is pay 25% off the student loan debt.
I see this student loan coming full circle and affecting those later in life who wants to attend university by becoming more expensive.
Nothing in life is FREE, the money have to come from somewhere, after all it does not grow on trees.

Herbalus

Socajam wrote: »

So the guess is to hell with student loan. I have received mine and to hell with everyone else.
The least the OP could do is pay 25% off the student loan debt.
I see this student loan coming full circle and affecting those later in life who wants to attend university by becoming more expensive.
Nothing in life is FREE, the money have to come from somewhere, after all it does not grow on trees.

Not at all. I’ll give some context.

I am repaying my own student loan, and could clear it in full. I have around £20k left to pay, as I’ve had a few years to attack it. My point is that I am much better off by delaying this repayment because of the opportunity cost of spending £20k on it now. The attitude is not to stuff the taxpayer.

I will give an illustration. I will clear the loan within 20 years, so I can either repay £20k now and gain £1k per year back in my salary to build back my house deposit again, or I can pay back the loan at £1k per year and start a capital repayment mortgage on a house instead of renting because I have a £20k deposit.

If the OP is on £30k in early 20s, chances are they will repay a huge amount of their loan, so not paying it now is not shafting the taxpayer.

xylophone

I am a graduate in my early 20s.

Do your future plans include buying a home?

If so, consider a LISA.

https://www.gov.uk/lifetime-isa

https://www.moneysavingexpert.com/savings/lifetime-isas/

As the rates are less than on standard savings, consider opening the account and funding from an account with a better rate near the end of the tax year.

You might consider opening a Virgin Money Branch Regular saver - up to £250 a month @3%.

Other savings rates here.



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

Make sure that you have looked at the current accounts available.
If you have never had a Nationwide Flexdirect Account, you might consider opening one - you might also consider a TSB Classic Plus.

You might wish to consider a stocks and shares ISA for the long term.

Below might be worth a read.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

https://monevator.com/using-vanguard-lifestrategy-funds-life/

Socajam

Herbalus wrote: »

Not at all. I’ll give some context.

I am repaying my own student loan, and could clear it in full. I have around £20k left to pay, as I’ve had a few years to attack it. My point is that I am much better off by delaying this repayment because of the opportunity cost of spending £20k on it now. The attitude is not to stuff the taxpayer.

I will give an illustration. I will clear the loan within 20 years, so I can either repay £20k now and gain £1k per year back in my salary to build back my house deposit again, or I can pay back the loan at £1k per year and start a capital repayment mortgage on a house instead of renting because I have a £20k deposit.

If the OP is on £30k in early 20s, chances are they will repay a huge amount of their loan, so not paying it now is not shafting the taxpayer.

So you are saying that you have a crystal ball of what is going to happen in the future?

Herbalus

Socajam wrote: »

So you are saying that you have a crystal ball of what is going to happen in the future?

I’m not really sure what you mean. I am making sensible plans about my future with the information that is available to me, on the assumption that I will have a “normal” life of 9-5 work. I’m not sure you can do any more than that at this stage.

If new graduates like the OP all reduce their loans by half, it will make no difference to the “repayments” that are taken from their salaries. It will only really benefit them later in life. There are enough financial pressures in your 20s that delaying this repayment into your 30s and 40s is beneficial. The student loans are repayable over 30 years - they’re designed to be long term.

steampowered

Unless you are planning to buy a house in the immediate future (i.e. 2-3 years), I would use up my ISA allowance by putting the maximum (£20k) into a stocks & shares ISA (probably a LISA). Probably through a balanced investment fund.

Stocks go up and down, but over a period of a few years that will even out. The average return on the major stock markets is about 8% per year.

There is risk with doing this but it is likely that the returns are more than likely going to be far superior than keeping it in cash.

I would put the remaining £15k in a savings account and use some of it to have fun. Maybe in a holiday fund.

Albermarle

I have also just come into £35,000 in an inheritance

The same question about 'what to do with inheritance/£50K etc comes up regularly so a quick scroll through the threads and the answers could be useful background.