Just about to graduate? Consider your finances

money money money...Out with the old, in with the new. A new Government is in office and with it will come a whole range of fiscal changes. At the moment the waters are still murky, but what we can expect are tax rises and spending cuts as well as the already announced pay cut for public sector workers.

For students, there could be even more struggle and hardship just around the corner. The Russell Group, which represents 20 leading, research-intensive universities is advocating increasing the rate at which graduates pay off their loans as well as lowering the starting repayment level to below the current £15,000. For medical graduates, after studying for at least five years the average debt is almost £23,000. How on earth can graduates pay all this debt off at a higher rate of interest as well as paying rent, clearing overdrafts and generally living?

Putting your earnings in the right place is one of the most important factors. You have several options available to you from savings accounts and investments through to current accounts.

One of the first things to do as soon as you start working is to switch from your graduate account to a high-interest current account. Santander offer some good rates on current accounts at the moment. Their Zero current account, for example, gives you 5% AER on balances up to £2,500 for the first 12 months, 12.9% on your overdraft and no fees. All you have to do is deposit £1000 a month, and of course not exceed that £2,500 limit. This involves a certain amount of juggling between accounts, but alongside a savings account this is a great way of earning interest without paying for it.

If you can’t have more than £2,500 in the above account – and other banks operate in a similar way – you will need to transfer anything above this amount to another account, ideally a savings account. You need to look for one that offers flexibility. An ISA, is an Individual Savings Account that offers completely tax free saving. You won’t pay any tax on the interest you earn and you can generate a pretty decent rate of return. Each year, we are given an ISA allowance, which is currently £10,200. You cannot exceed this amount in any one year, but you can add up to this amount, so you don’t need to deposit the cash in one lump sum. Interest rates on many ISAs are around 3%, not a bad rate of return at all.

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