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Wealth Check: 'How can I start to save and invest for the future?'

Sanal Menon, a 27-year-old Londoner, is a human- resources assistant at a healthcare organisation. He lives in rented accommodation and earns £16,000 a year.

Sanal typically spends £570 a month, plus loan repayments, and is concerned he isn't saving for the future. His only debt is a £3,000 loan with just six months' of repayments left, and his aim is to increase the £200 left each month and explore investment opportunities with a view to starting a business, while keeping some cash back for emergencies.

We asked three financial advisers for their suggestions: Andrew Swallow, of Swallow Financial Planning, Anna Bowes, of AWD Chase de Vere, and Andrew Merricks of Skerritt Consultants.

Case notes

Sanal Menon, 27, human resources, London

Salary: £16,000 a year.

Monthly income: £1,050 after income tax and National Insurance contributions.

Monthly spending: £570 a month on average, including rent, bills and miscellaneous living expenses.

Property: currently living in rented accommodation.

Pension: none.

Debt: took out personal loan of £3,000 to consolidate credit card debts, with monthly repayments totalling around £300. Six months of repayments remaining.

Savings: Sanal tries to roll over £200 of income each month, held within bank account.


Sanal must pay off his loan before he can think of increasing his savings and consider investment, say the advisers. Andrew Swallow advises him to pay his loan off more quickly, so that he can start saving as soon as possible. This will free up £300 a month, which could be rechannelled into a cash ISA, a tax-free savings account in which you can save £3,000 a year.

Anna Bowes suggests the Kent Reliance Building Society, as it offers a rate of 5.21 per cent on its easy- access ISA.

She warns Sanal to be careful about savings and investments. If he wants to start a business or buy a house in the near future, he will need access to his cash, so he shouldn't focus on long-term assets such as the stock market.

That said, Sanal also donates to fund-raising organisations for Africa and Asia, and says he wants to contribute to providing for the underprivileged while saving for his retirement and the next generation.

Swallow suggests that he invests in ethical funds, thus killing two birds with one stone. Bowes says that giving money isn't the only way to support charity and suggests that, until Sanal sorts out his finances, he could do voluntary work instead.


Sanal must be realistic to avoid disappointment later, the advisers warn.

The first step is to find out whether his employer has a pension scheme he can join. This option should not be lightly dismissed especially if his employer will contribute as well.

Swallow also says that Sanal should check to see if his employer provides income protection, as this would cover him in the event of any long-term illness. Bowes adds that if Sanal makes wise financial decisions now, he should be able to provide himself with a more comfortable future, and if his employer doesn't offer a pension scheme he should look into taking out a personal pension.

He is a basic-rate taxpayer so if he invests £20 a month in a pension he would receive 22 per cent tax relief - an extra £5.64. Bowes suggests Legal & General and Standard Life as decent providers of low-cost stakeholder pensions.

However, Merricks feels that a stocks-and-shares ISA might be preferable to a pension. Sanal could make a lump-sum contribution to a pension later to gain tax relief. And ISAs are tax-free when investors take money out, unlike pensions.


When Sanal can afford it, he should look at medium- to long-term investments. Bowes suggests he does this via unit trusts or Oeics, and starts by investing into core funds such as Cazenove's UK Growth & Income or Perpetual's Income Fund. Even so, it will take some time to build a healthy portfolio of investments.

For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk