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February 25, 2012 7:56 AM   Subscribe

MoneyFilter: A small windfall arrives in the pocket of a poor UK student. What should he do with it?

I have just received my share of my grandmother's estate and I would like MetaFilter's input on how best to take care of it. I intend to spend a small amount adding some extra frills and spending money to my already-paid-for holiday (thanks for the advice on that by the way, guys). After this, I will have in the region of £3,000 to do with as I wish. So, here are my circumstances:

I am on an industrial placement year during my university course. It is paid, but only a smidgen above minimum wage. This keeps my bills paid, gives me some extras like gym and weekly sports, but doesn't allow me to save anything. Other than my student loan, my only debts are a small amount on a credit card which I could pay anyway with my income.

I had savings in a mini ISA but I've drained it because the interest dropped so low that it was better to avoid an overdraft than maintain the account.

The most immediate thought that's springing to mind is that I could really do with being able to drive. I started learning before university, but then getting a degree took precedence, and I stopped. This windfall could probably get me all the way through to having my test passed, and I might even be able to buy a cheap little runabout when I'm done (I'm a mature student at 27, so I won't be paying the stupid levels of insurance that younger people are hit with).

Other than that, though, I'm short of ideas. It's too small to invest, and I don't know what else I would really benefit from. Throw some ideas my way!
posted by fearnothing to Work & Money (11 answers total)
Having recently graduated and done the job hunt, I would advise putting it aside as a cushion for that period unless you have a job lined up already and know you won't have to move or put down a big chunk of money up front for a travel card.

Also, sorry to break it to you, but as a female driver of 31 in a fairly low risk area, the quote for my insurance this year was over £900. I did get it down to £450 by shopping around. That's with a high excess and a year no claims in a 10 year old car.

Of course, if being able to drive will open up more jobs for you then that might be a good investment.
posted by kadia_a at 8:07 AM on February 25, 2012 [2 favorites]

Boring but prudent answer: Pay off your credit card debt and keep the rest in a savings account for emergencies. It's understandable that you aren't saving that much given that you are still a student without much income, but financially living paycheck to paycheck with no savings is not a great situation to be in. If you spend all of the windfall on something that isn't absolutely necessary, you might find yourself in a worse situation later when you actually do need the money.
posted by burnmp3s at 8:14 AM on February 25, 2012 [2 favorites]

Learning to drive does sound like a good idea, especially if that is something you have an interest in. I know a few people who never learned to drive before they started university and then had to scramble to pick it up quickly afterwards when they realized how useful it was for getting a job and commuting. But that very much depends on where you live and what type of job you will be looking for.

Honestly though I would just save it to give you some money to live on when you finish and need to start looking for a job. I've been saving everything I can from my student loan (which is really not much!) for keeping me afloat post-graduation, and I would personally clear the credit card debt and put the rest of the £3000 straight into a new ISA.
posted by maybeandroid at 8:17 AM on February 25, 2012

To start pay off your credit card and set aside an emergency fund -money you don't touch except for a true emergency (illness, family emergency), or look at your expenses for the last 3-6 months and set that amount aside.

Now look ahead to when you are finished your education:

when do you have to start paying off your student loan?
do you have a job lined up?

That extra money can be used to tide you through when your student loans are done and you are not working.

You are using some of it to upgrade your vacation, which is awesome, but save the rest, it's really not that much money once you leave university and are on a job hunt or can't work because you are ill.
posted by Snazzy67 at 8:17 AM on February 25, 2012

Response by poster: I don't mean to thread sit, but it's probably a good idea to say:

1. Forget the credit card, I can take care of that from my wage, it was just a way of saying "I don't really have any big money worries right now"
2. I don't have to start paying off student loan until I'm earning over £16,000 per year. It doesn't start accruing interest until my course is over.
3. No I don't have a job lined up, I'm going to start looking for one September this year, looking to start June/July next year.
4. Yes driving would broaden my opportunities for a job. One of the positions I applied to for this placement year turned me down solely on the grounds that I couldn't drive.
posted by fearnothing at 8:24 AM on February 25, 2012

It sounds like you really want to buy a car, which is fine.

I think that you should save the money for now. Definitely give yourself some fun money, but ultimately it's not a really large sum and you should save the rest of it. Then, once you start looking for jobs, apply to ones within walking distance and driving distance. If you get an offer on a job where you need a car, then spend the money on a car.

Just my two cents, from one poor student to another.
posted by pintapicasso at 8:54 AM on February 25, 2012

It sounds like you really want to buy a car, which is fine.

I think the OP doesn't know how to drive yet and is talking about using the money for driving lessons, which is different from just wanting a car.

One of the positions I applied to for this placement year turned me down solely on the grounds that I couldn't drive.

In that case it does seem like a good idea to learn to drive. As I said in my earlier post I certainly I know people who had to learn pretty quickly after graduating when they realised that some companies/industries ask for this.

I will add that while the money you've got should certainly cover lessons (unless you take as long to learn as I did!) you may struggle to actually get a car afterwards. Even if you can afford an old, cheap one, the insurance will still be costly. But as long as the jobs you're applying for just need to be able to drive rather than own your own car, that shouldn't be a problem. You can always tell them that you'll buy a car when you get the job!
posted by maybeandroid at 9:17 AM on February 25, 2012

You probably want to keep at least some back to cover unforeseen needs in the future.

Some needs that are pretty foreseeable, but we don't always foresee, include needing to put down a deposit when you need to start renting a place, replacing things like PCs that are working ok now, but won't last for ever, and being able to pay for a course or two that could help you.

Also bear in mind that when you do get a job, you often need to cover a month's worth of living and commuting expenses before you even see a paycheck.

That said, learning to drive opens a lot more options for where you can work, where you can live, where you can socialize etc. So while actually getting a car might or might not be an indulgence, getting your license is certainly a good idea for most people.

Another thing about learning to drive, the later you leave it, generally the longer it will take to learn, and so the more it will cost you.

Also if you are lacking any of the essentials for job hunting, say a computer or a suitable interview outfit, those should be priorities as well.
posted by philipy at 9:34 AM on February 25, 2012

Can I also suggest that you spend £50 or so of it on something you'll keep that'll remind you of your grandmother every time you look at it - a nice framed print of an artist you like, a little piece of sculpture, just something you really like that you wouldn't have bought without your grandma's money. Then it'll give you lasting pleasure, and will also remind you of your grandmother.
posted by essexjan at 12:22 PM on February 25, 2012 [3 favorites]

Hi. Just a quick aside to point out that whilst your mandatory student loan repayments don't start unless you're earning above £xxk, the interest begins accruing from day one.

That's how it was a few years ago and a quick check suggests it hasn't changed.

As far as your question is concerned - I'd suggest getting your driving license but not worrying about a car until you need one. Even if you've never used it, being able to say you've had a license for x years rather than x weeks will make a substantial saving to your first car insurance policy.

I have a friend who got his license at 17 and didn't drive a car for 10 years afterwards, but still benefitted from the license issue date when it came to buy/insure his first car.

If these things matter to you then you might want to consider what your grandmother would have liked you to do if it was a gift given whilst she was still around - maybe buy something small as a keepsake that you'll have around in the future?

All the best.
posted by Simon_ at 12:47 AM on February 26, 2012

Would you be able to get a friend to let you do a few practice lessons, in a quiet area (like an abandoned car park) before starting to pay for lessons? The reason I ask is because I spent significantly more than £3K learning to drive (because I get nervous in the test and make silly mistakes) and I started roughly about your age. Maybe a quick run through with a friend would allow you to figure out if you're a natural or not.

I totally agree with Simon_ about passing the test and then not buying a car until you need one. I passed my test, and then didn't buy a car for two years. I could indeed say I had my licence for 2 years, and was accident free in those years. It also means that if you do find you need a car to get to work, you can buy the right kind of car for the type of journey you'll be doing.
posted by SuckPoppet at 8:35 AM on February 27, 2012

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