INCOME VERSUS GROWTH: Listen to reality in the roaring twenties

Your 20s and early 30s are the time when you need to get your financial act into gear. Once you have got a job make sure that you pay off any outstanding debts you owe, such as student loans or oversized credit card bills.

If you have large sums outstanding, transfer the balance to a low-interest card. There is no point in paying over the odds in interest charges too. The Co-Operative Bank is charging 5.9 per cent as an introductory rate, while RBS Advanta and the People's Bank of Connecticut are charging 6.9 per cent.

Once you have dealt with debt, work out how much you spend each month on rent or mortgage, bills, travel, food and entertainment. List everything from your council tax to your daily paper. What is left over is what you have to save and invest. At this stage it may not be much because you are probably near the bottom of the career ladder but your income should rise year on year as will the amount you can save. Even if it is only pounds 30 a month this is still enough to start many stock market-based schemes.

The first step in saving is to build up a contingency fund that will protect you if something goes wrong, for example, you lose your job or the washing machine needs mending. Set up a standing order to go straight out of your account into an easy access savings account. Top payers at the moment are Egg, which is paying 6 per cent on its postal account, and Virgin Direct, which is paying 5.75 per cent. You want to keep your savings fairly flexible as you're probably going to need the money for another purpose in a few years.

Decide what your priorities are. If you plan to buy a house most of the best mortgage deals demand at least 10 per cent of the property's value as a deposit, so it will help if you already have that when the time comes. If you don't intend to buy somewhere for at least five years, you could consider equity savings in a unit or investment trust, open-ended investment company (Oeic) or an individual savings accounts (ISA).

Warren Perry, senior investment manager at Bristol-based Whitechurch Securities, suggests that you aim for two or three regular savings schemes. And if you are new to stock market investment he advises you to look at unit trusts. Go for growth-based investments because you are unlikely to need an income for at least another 20 to 30 years. If you are fairly cautious stick to UK or European investments. The box on the right shows which investments are worth considering but you may want to see an independent financial adviser (IFA) if you don't know which investments to choose.

Independent Financial Advice Promotion (0117 971 1177) can give you a list of three IFAs in your area. The advice will be free. The IFA gets paid by commission from the product providers, which means there is a fundamental problem at the heart of all "independent" advice. It is surprisingly easy to get to grips with savings and investment topics and you may find you feel comfortable doing your own financial planning and saving money. Weekend papers are useful, and if you have internet access look at sites such as MoneyWorld (www.moneyworld.co.uk).

If you are thinking of buying your first house, there are good mortgage deals around, especially for first-time buyers, but you need to read the small print. Fixed rates give you the chance to plan your outgoings but you are gambling on interest rates. However, many experts don't think they will drop much below current levels.

Saving for your retirement can wait if your finances are stretched. But if your company offers you a pension scheme, you should probably join it if you are eligible. Even if you plan to move jobs frequently, it is often worth it because the employer bears the brunt of the contributions and you also get other perks such as built-in life insurance.

If you have a personal pension, keep paying into it. You've probably only recently started it and as most stack up administration charges at the beginning of the pension's life, the penalties for leaving will outweigh the benefits. Up to age 35 you can contribute 17.5 per cent of your earnings but if money is tight, now is not the time to be maximising your pension fund because once the money has gone, you won't see it again until you retire.

It's far better to look at tax-efficient equity savings, which can be stopped and started at will. This also applies if you haven't got a pension yet.

If you do plan to move jobs frequently, equity-based savings can also be a good way of building up a lump sum to put into a pension fund at a later date or to supplement another pension scheme.

n Contacts: Egg, 0845-600 0292; Virgin Direct, 0845-610 1020; Co-Operative Bank, 0800 126000; People's Bank of Connecticut, 0500 551055; RBS Advanta, 0800 077770; Jupiter, 0171-412 0703; Gartmore, 0171-782 2000; Invesco, 0171-626 3434; Britannia, 0141-248 2000.

Suggested Topics
PROMOTED VIDEO
Life and Style
Out and about: for 'Glee' character Bert Hummel, having a gay son was a learning curve
lifeEven 'cool' parents need help parenting gay teens
Sport
Nathaniel Clyne celebrates after salvaging a point with the Southampton equaliser
footballAston Villa vs Southampton report
News
peopleJack Monroe accuses David Cameron of 'misty-eyed rhetoric'
News
Tana Ramsay gave evidence in a legal action in which her husband, Gordon, is accusing her father, Christopher Hutcheson, of using a ghost writer machine to “forge” his signature
peopleTana Ramsay said alleged discovery was 'extremely distressing'
Arts and Entertainment
Robin Windsor and Aljaz Skorjanec rehearse their same-sex dance together on Strictly Come Dancing
TV
News
ebooksNow available in paperback
Money
Anyone over the age of 40 seeking a loan with a standard term of 25 years will be borrowing beyond a normal retirement age of 65, and is liable to find their options restricted
propertyAnd it's even worse if you're 40
Arts and Entertainment
Perhaps longest awaited is the adaptation of Jack Kerouac’s On the Road with Brazil’s Walter Salles directing and Sam Riley, Kristen Stewart and Viggo Mortensen as the Beat-era outsiders
books
Arts and Entertainment
theatreSinger to join cast of his Broadway show after The Last Ship flounders at the box office
Life and Style
fashion'To start singing with Pharrell is not that bad, no?'
News
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Argyll Scott International: Risk Assurance Manager

Negotiable: Argyll Scott International: Hi All, I'm currently recruiting for t...

Argyll Scott International: Business Analyst - MGA - London Market - Insurance Broker

£50000 - £60000 per annum + benefits: Argyll Scott International: A Business A...

Ashdown Group: PR, Marketing & Events Executive - Southwark, London - £35,000

£30000 - £35000 per annum + benefits: Ashdown Group: PR Marketing & Events Exe...

Selby Jennings: C++ Developer – Hedge Fund – New York

$80000 - $110000 per annum, Benefits: Bonus and Employee Investment Scheme: Se...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible