Wealth Check: 'Can I afford to do my Masters in London?'

Claire Weston, 23, has recently graduated from Oxford University with a degree in classical archaeology and ancient history. She is now living at her parents' home in order to save money and plan her future. Claire would like to move to London and work in museums, which will require further study. She is concerned about her plans to undertake an expensive Masters programme and move to London next year on limited savings: "I want to know if its feasible."

Case notes

Income: she earns £600 a month as a waitress.
Monthly outgoings: £40 in NI, £100 to her parents for living expenses, £30 for her phone tariff and £250 on other expenses
Debts: £10,000 on a student loan.
Pension: £0.
Savings: £1,500 in a savings account and £7,000 in an ISA.
Mortgage: £0.

Three financial advisors offer Claire their help this week: Mel Kenny of Radcliffe & Newlands, Martin Bamford of Informed Choice, and Kay Burt of Kay Burt Investments...

Savings

Burt applauded Claire's approach of taking a cash ISA, but warns she must ensure she is getting the best interest rate. "If her cash ISA is not paying the best rate now, then she can move to a new provider free of charge while still keeping her ISA wrapper intact." This move can be effort-free: "She will just need to give the details to the new provider, and they will do all the administrative work."

If Claire's work generates less than £6,035 pa, her tax-free allowance for this year, she can get the interest in her ordinary bank accounts paid gross, advises Burt. To do this Claire must fill in a R85 form at her branch. "However, she would have to alert them if she was likely to exceed the personal allowance in the next tax year," he says.

Debts

Claire has £10,000 outstanding on her student loan for her first degree. Bamford estimates that the average fee for a one year Masters course is £2,740, but this can be significantly higher in London. He advises Claire to think carefully about the cost of additional study and living expenses. "While it should be possible to partially fund both from student loans, this would add to the £10,000 debt that Claire already has." Once she completes her studies, he advises her to remove the debt as quickly as she can; within five years if possible. Although a part-time course would take twice as long, Burt advises that it would enable Claire to stretch her savings and reduce her debt, as her study could be partially funded by working.

However, while Kenny advises that she must budget for her post-graduate carefully, he says the recession has some advantages. "Claire may benefit from the over supply of rental properties in some areas, which in turn are reducing rental prices."

Pension

Claire would like to retire at 65, with around £15,000 a year income on retirement. All the advisors agree that a retirement fund is not Claire's most immediate financial concern. "She will still have time to build up a sizeable pension fund when she is in her early thirties and forties," says Bamford.

A non-smoking woman aged 65 currently needs a pension fund of approximately £259,000 to generate a net pension income of £15,000 a year, according to Bamford. Therefore if Claire starts paying a pension at 30, she will need to invest around £170 a month.

Property

Claire would like to own her own house by the time she is 30 and preferably in London, although she believes the likelihood of this is "reduced" due to London prices.

Both Burt and Bamford believe, once her course is over, that Claire should first focus on repaying loans and then saving money, some of which should go towards a future deposit. Bamford thinks buying a house by the age of 30 in London is an "ambitious" aim for Claire.

However, Kenny more optimistically believes the property market will be very weak in seven years' time – which would be ideal for Claire. "If the property bears are right, it might not be until then that property prices bottom out, meaning that purchasing property in London would be far more affordable for Claire."

For a free financial check-up, write to Wealth Check, The Independent, 191 Marsh Wall, London E14 9RS; or email wealthcheck@independent.co.uk