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Rob Walker - Coggle Diagram
Rob Walker
Personal information
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He normally earns around £1,400 per month after paying his business expenses but this does not include his tax and national insurance.
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In the longer term, he would like to move to a rented home of his own next year and in the next three to five years he wants to get married, buy his own house and start a family.
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Rob has just inherited £22,000 from a distant relative.
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Rob has a number of options with what he can do with this money; he can repay his loan, keep his existing cash ISA, switch his savings to one of the three products he has noted, buy another savings product or make investments.
Rob decided to switch accounts but still stay with Green Bank as he is pleased with the customer service and agrees with the provider's values.
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Saving
Rob is happy with the customer service at his current building society and likes their approach to social responsibility
However, the return he gets on his instant access cash ISA is only 0.25% AER.
He thinks he might get a higher return if he saves for a longer term; he has been looking at the savings and investments options that Green Building Society offers.
He knows that whatever he does, he will face some risk but does not want to lose the capital sum of his inheritance.
Rob uses a computer for his work and likes the idea of applying for and operating a savings account online.
Some savings accounts have maximum amounts you can have in the account which may not be convenient for Rob.
A disadvantage with his current account is that it is managed by passbook so he has to go into the branch to make deposits and withdraw money.
Recommendation
Rob should transfer his £500 that's already in his savings account into the Online Cash ISA because it will earn him a higher AER.of 2.2%
Rob is recommended to make the maximum contribution to an ISA product because it is low risk and offers a higher rate of return than the other low risk product (the e-bond).
The interest is paid free in income tax so Rob keeps all the return; because he pays income tax on his earnings.
It would be a good idea for Rob to find out if he can repay his van loan early and what amount would be needed to clear the debt, including all charges.
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Advice he was given
Rob's friend Max tells him 'I've read that now is the right tie to invest in shares because they are so cheap. Share prices are bound to increase in the next five years or so'
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His father advises him to use his inheritance to pay off his debts and says that it doesn't make sense to be paying 5.9% interest on his loan and earning such a low interest on his savings.
Again, his father is not a professional so his advice may not be as reliable.
Savings accounts
Rob could put his money into a notice account which will stop him from dipping into it and also he will earn a lot more interest back on it.
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The rules say that Rob can contribute to one cash ISA and/or one stoks and shares ISA in any one financial year.
Attitude
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In three years time when he has paid of his loan for his van, Rob may want to trade in his van for a new one because the van will be much older.
This means he may have to take out a new loan for buying a new van because he won't get much for selling his old one.
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