Wealth Check: 'I want to clear my debts and start saving'

Matthew Miller, 19, from Rugby, has just started out as a furniture maker and earns between £10,000 and £15,000 a year. Short term he is trying to save money for specialist tools, but he plans to start his own business at some point. With no savings, but some cash left over at the end of the month, he is also keen to pay off his car loan, and start a pension.

But Matthew is not only worried about his own financial future. "I'd also like to look after my mum," he says. "She's a single mother and I would like to be able to help her out." He says that the £100,000 life assurance policy he has is there to "look after my mother if anything happens to me".

We asked three financial advisers to offer Matthew some guidance: Donna Bradshaw, from IFG Financial Services, Paul Monk from Balmoral Associates, and Mel Kenny from Radcliffe & Newlands.

Case notes: Matthew Miller, 19, furniture maker, Rugby

Salary: £10,000 to £15,000

Monthly outgoings: £580

Mortgage: £0

Savings: £0

Pension: £0

Debt: Small car loan

Savings & investment

Our advisers believe Matthew should pay off his debts before beginning to save, as his interest rate will be much higher on the debt than any he would earn on his savings. "I would suggest he looks at obtaining an alternative quote in relation to his loan agreement with Alliance & Leicester at 9 per cent," says Paul Monk. "Sainsbury's Bank is offering loans for £5,000 and above for an attractive rate of 7.99 per cent, which should save Matthew around £50 per year in interest."

"Matthew lives within his means and can afford to save up to £200 per month," says Donna Bradshaw. "The best home for that money he has available each month is a tax-free mini cash ISA. The best ISAs pay in excess of 6 per cent, and some of these include an introductory bonus."

Mel Kenny urges Matthew to pay off his debts first, but says that the Scarborough Building Society's regular savings ISA offering 6.5 per cent, could be the place for Matthews savings. Alternatively, for full flexibility with balances of £1,000 or more, he suggests the National Savings and Investments direct ISA, which currently attracts a variable rate of 5.80 per cent. "Otherwise, Icesave's cash Mini ISA currently attracts a variable rate of 6.1 per cent, or, for lower balances, Egg's cash mini ISA pays a variable interest rate of 6.05 per cent."

But for his long-term goals, our advisers suggest Matthew takes out equity-based ISAs. "Matthew has a low attitude to risk and so his options are limited," adds Kenny. "But if he can accept a greater degree of risk, Matthew could consider Neil Woodford's reputable Invesco Perpetual Income Fund or Mark Lyttleton's head-turning BlackRock UK Absolute Alpha Fund. Both managers have a good track record in turbulent markets."

Monk also suggests that the Jupiter Emerging Opportunities Fund and the Liontrust First Growth Fund are both good places for Matthew's long-term investment.

Pension

Bradshaw notes that Matthew has not yet started a pension, and urges him to begin, even if his initial contribution is only small.

"It is never too early to start a pension," she says. "The money that he invests in the early years will have a much bigger impact than money saved in later years. Matthew could start with as little as £20 per month in a low-cost stakeholder plan."

Protection

Bradshaw says she would not usually recommend life assurance for someone of Matthew's age, with no financial dependants. However, she acknowledges that he wants to make some provision for his mother, should anything happen to him, and suggests that Matthew check he isn't paying over the odds for the cover.

Monk agrees: "Depending on how long he has had the £100,000 life assurance plan, Matthew could look to obtain an alternative plan provider to get a cheaper premium. Friends Provident will provide £100,000 over 20 years at a cost of £5.66 per month."

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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