by Roddy Kohn, an independent financial adviser at Kohn Cougar: Name: Hayley Box Age: 23 Job: PA to MD of small communications company in London Salary: pounds 18,000, due to rise to pounds 19,500 in three months' time
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Hayley is moving to London next month where she plans to share a rented flat with friends. The move from her parents house in Frinton- on-Sea, Essex, will shrink her monthly commuting costs of pounds 320, though rent of around pounds 300 per month will soon make up for this.

Living within her salary is no problem for Hayley. "I tend to budget reasonably well, but I think I'll have to tighten my belt a bit more when I move to London," she says.

Hayley is keen to build up some savings. She now has pounds 700-pounds 800 in a Woolwich Building Society account, but this will be eaten up in the move, mostly on a deposit for a flat. She's cautious about how much she will be able to save when she's living in London, but thinks she may have about pounds 50 a month spare. "I want to know what's the best way to make your money grow," she says, "and I'm quite interested in stocks and shares."

Roddy Kohn, an independent financial adviser at Bristol-based IFA firm Kohn Cougar (Tel: 0117 946 6384), tells Hayley:

"Despite Hayley's enthusiasm to get her financial planning underway, she should do nothing at the moment about investing money or for her pension. She has been in her current job less than a month and it would be best to wait and see how things work out. Also, Hayley proposes to spend her savings on the deposit for a flat and so her first priority should be to replace this money over the next six months.

Next Hayley needs to prepare a written detailed budget of her expenditure in the new flat. She should remember if one of the friends moves out, the rent will still need to be met, and that may increase her monthly payments until a replacement is found.

The next priority will be to talk to her boss about the company's policy in the event of her being long-term sick through accident or illness. She needs to establish what income payment she would be entitled to from her employer and how long it would be before she was dependent on state benefits. Not surprisingly, these are meagre and though Hayley could always move back with her parents, she may feel at twenty-three that this is increasingly less practical.

If her employer has no sickness and accident policy in force (commonly referred to as Permanent Health Insurance, and not to be confused with Private Medical Insurance which is for hospital treatment) she will need to think about setting aside pounds 15-pounds 20 per month for a suitable policy which, in the event of long-term illness, would provide pounds 9,000 a year on top of state benefits.

I appreciate Hayley wants her savings to work hard, and it is best to break the illusion early on in life that money kept in a building society will do that. Hayley's past savings would probably have carried little more that 1-2 per cent interesta year. It's best to regard deposit accounts simply as places where money can be accessed quickly.

She must talk to the Woolwich about their highest paying monthly deposit account. She must be careful of the advice she gets from branches because they often don't point out the benefits of opening a postal account. She may even want to consider opening a Tessa (tax-exempt special savings account) as a way of getting a higher return on monthly saving. But she would have to invest the money for five years for it to be tax free.

The second part of my advice would be for 6-12 months time. Her first goal should be to try to save 10 per cent of her take-home pay. In a technically correct world all this money would be put into a personal pension, or if her employer did offer her a company pension scheme, she could make additional contributions.

She also needs to take advice from an independent financial adviser about making contributions in a pension scheme through an option called "salary sacrifice". This has the benefit of saving both employee and the employer National Insurance costs on the pension contributions. Hayley may be able to put the case to her boss for him contributing the savings that are made on his part of the National Insurance into the pension for her.

Some of my younger clients find this "technically correct approach" too boring and want to feel that there is something at least a little more accessible than a pension. If Hayley feels this way she could consider using half her monthly savings on a Personal Equity Plan instead. A PEP is a tax-efficient way of holding an interest in shares.

At her age there is no point in being timid about risk. In Hayley's case I would happily recommend a fund such as Henderson Strata Investment Trust. Kohn Cougar would risk this at 7 (where 0 is the building society and 10 is high risk), because it invests in smaller companies but has an excellent investment track record and should produce handsome returns over the long term. Remember, this is not guaranteed, and Hayley should have her adviser keep an eye on the plan over the year.

Last but not least, keep matters under review and try and choose an adviser who you feel is likely to be with you for the next ten years, not the next ten minutes!

Rachel Fixsen

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