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  • FIRST POST
    • silvermum
    • By silvermum 7th Oct 17, 8:16 PM
    • 140Posts
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    silvermum
    Ideas for investing £70k now for uni in 2018?
    • #1
    • 7th Oct 17, 8:16 PM
    Ideas for investing £70k now for uni in 2018? 7th Oct 17 at 8:16 PM
    My son inherited some money from his grandfathers estate a few years ago. It has been held in trust ( I was a trustee), but he is 18 in a few months and I want to help him decide what to do with it in preparation for him going to Uni in 2018. He is pretty level-headed and we've already agreed that I will help him manage his finances for the next few years at least.

    He has 1/3 share of a property (rented out) which gives him about £420 month (currently saved into an JISA)
    There is about £20k in the JISA (75% cash, 25% funds)
    And £50k in a child savings account which matures on his 18th.

    He is happy to keep his share of the property (I manage the tenancy) but we're not yet sure what to do with the rest?
    We obviously need a rolling plan which will maximise the return for the next 12 months but leaves things open for him to draw an income (or some capital?) to fund himself through university.
    Not yet sure whether it will make sense for him to get a student loan, as he may be a high income earner in the future, based on his degree choice.

    Thoughts so far include:
    - putting £20k into an adult S&S ISA by April 2018 & remainder into Santander/NS&I (but these would be earning less than inflation...)
    - putting £40k into ISAs over next 12-18 months, into income unit trusts.
    I feel the market is current high/due for a crash though, so am concerned about investing large sums over a short time frame.

    Any thoughts?
Page 1
    • xylophone
    • By xylophone 7th Oct 17, 8:59 PM
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    xylophone
    • #2
    • 7th Oct 17, 8:59 PM
    • #2
    • 7th Oct 17, 8:59 PM
    Lifetime ISA?

    https://www.moneysavingexpert.com/savings/lifetime-ISAs
    • silvermum
    • By silvermum 7th Oct 17, 9:36 PM
    • 140 Posts
    • 51 Thanks
    silvermum
    • #3
    • 7th Oct 17, 9:36 PM
    • #3
    • 7th Oct 17, 9:36 PM
    Thanks, but I'm not sure how this would meet the objective we're trying to achieve?

    Because my son already has 'an interest' in a property, and will become part-owner when he turns 18, he would not be able to use a LISA for a future house purchase, so would probably have to return the 25% bonus?
    • chockydavid1983
    • By chockydavid1983 7th Oct 17, 10:38 PM
    • 481 Posts
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    chockydavid1983
    • #4
    • 7th Oct 17, 10:38 PM
    • #4
    • 7th Oct 17, 10:38 PM
    For any money that needs to be accessible during uni, this should be held in the best available current accounts and regular savers.
    For longer term savings, a S&S ISA should be considered and it's never too early to contribute a bit towards a pension. For those starting out, look at multi asset funds as these give good diversification across countries, sectors and asset types.
    But if he would be looking to buy a house within 10 years with any of this cash, that money shouldn't really invested. I think you're right about the LISA, in this case the best current account and regular savers would be best.
    • george4064
    • By george4064 7th Oct 17, 11:04 PM
    • 865 Posts
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    george4064
    • #5
    • 7th Oct 17, 11:04 PM
    • #5
    • 7th Oct 17, 11:04 PM
    I would go ahead and open a Stocks & Shares ISA for him.
    "If you arenít willing to own a stock for ten years, donít even think about owning it for ten minutesĒ Warren Buffett

    Save £12k in 2016 - #045 £10,358.81/£12,000 (86%)
    Save £12k in 2017 - #003 £11,830.10/£12,000 (99%)
    • enthusiasticsaver
    • By enthusiasticsaver 7th Oct 17, 11:56 PM
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    enthusiasticsaver
    • #6
    • 7th Oct 17, 11:56 PM
    • #6
    • 7th Oct 17, 11:56 PM
    If he needs some of the money in 2018 then he should be saving rather than investing.

    Has he done a budget so he knows what income he will need each year of his degree? He could apply for the loan (in fact he probably should) just in case his earning capacity is not as large as expected. He can always repay it after he graduates if he has sufficient. If he works out the income he will receive from the BTL and student loan he will know what shortfall to keep back. A stocks and shares isa would then be a good option.
    1 week to go until early retirement. Debt free and mortgage free.

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • kidmugsy
    • By kidmugsy 8th Oct 17, 12:14 AM
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    kidmugsy
    • #7
    • 8th Oct 17, 12:14 AM
    • #7
    • 8th Oct 17, 12:14 AM
    F it's never too early to contribute a bit towards a pension.
    Originally posted by chockydavid1983
    Oh yes it is. He should wait until his pension contributions harvest an employer's contribution.

    Use high interest current accounts and regular savers as much as possible. Tie nothing up in long term stuff e.g. S&S until his plans are clear, and probably not even then. His property is a long term investment already, and that's probably quite enough for the time being.

    Suppose he were to do a three year degree. Allowing £9k for fees and (say) £9k for maintenance (we'll ignore his rental income) then he'll burn through £54k. If he did a four year degree, £72k. Or he might want to do a masters degree, or legal training, or whatever. £70k doesn't look so large, does it?


    Because the interest rate charged is higher than he can earn on cash (or, quite possibly, investments) student loans are unattractive for someone who expects to have to pay it all back. So in his shoes I'd be tempted to spend my capital on avoiding such loans. He'd want to keep his eyes on the news, though, in case the terms become more attractive.




    "Interest Rates ... Undergraduate loans ...

    Income Contingent Repayment Loans for post - 2012 - (Plan 2) loans
    From 1 September 2017 until 31 August 2018 ...

    Whilst studying and until the April after leaving the course RPI+, plus 3% (6.1%)
    From 6 April after leaving the course until the loan is repaid in full Variable rate dependent upon income. RPI (3.1%) where income is £21,000 or less, rising on a sliding scale up to RPI +3% (6.1%) where income is £41,000 or more ....

    Postgraduate Loans (England and Wales)
    From 1 September 2017 until 31 August 2018, the interest rate for borrowers in England and Wales taking out a Postgraduate Loan for a Master's degree will be 6.1% (RPI + £3%)."
    • xylophone
    • By xylophone 8th Oct 17, 11:20 AM
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    xylophone
    • #8
    • 8th Oct 17, 11:20 AM
    • #8
    • 8th Oct 17, 11:20 AM
    In your son's particular circumstances (having inherited a part interest in a property), it may be worth investigating whether he would still be accounted a "first time buyer" for LISA purposes.
    • silvermum
    • By silvermum 23rd Oct 17, 4:29 PM
    • 140 Posts
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    silvermum
    • #9
    • 23rd Oct 17, 4:29 PM
    • #9
    • 23rd Oct 17, 4:29 PM
    In your son's particular circumstances (having inherited a part interest in a property), it may be worth investigating whether he would still be accounted a "first-time buyer" for LISA purposes.
    Originally posted by xylophone
    Yes- I will check, but I remember looking into it when LISAs were introduced and at that point it seemed that he would not be eligible.
    • maxie014
    • By maxie014 23rd Oct 17, 8:07 PM
    • 142 Posts
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    maxie014
    Just dont give him access to all the cash,one of my sons friends was a highly sensible lad who burned through his 27k inheritance in the first year of uni!!!!!!
    • thesuburbs
    • By thesuburbs 23rd Oct 17, 8:38 PM
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    thesuburbs
    Just dont give him access to all the cash,one of my sons friends was a highly sensible lad who burned through his 27k inheritance in the first year of uni!!!!!!
    Originally posted by maxie014
    I'm not sure "highly sensible lad" and "burned through 27k inheritance in the first year of uni" belong in the same sentence...
    • anselld
    • By anselld 23rd Oct 17, 10:44 PM
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    anselld
    Returns in the next 12 months is a minor consideration in the overall scheme of things.

    The big decision is whether our not to self fund Uni. If you believe the Martin Lewis spin that it should not be called a debt but a graduate contribution, then he should invest his money and take out the loan (not sure what the PC term for loan is). However, if he is confident of maintaining a high graduate income he will be much better off by avoiding the punitive interest rates charged on the student debt contribution.

    Making that decision first is important because if money is to be invested long term and Uni funded by loans then the stockmarket should be the best place. If he needs access then something more short term would be needed.

    Incidentally, BTL property is OK in the short term, but his third share will mean he will incur 3% SDLT surcharge on any future residential purchase. Not a problem for a few years I guess but he should probably have a plan to dispose of his share if he needs to and before he incurs too much CGT liability.
    • Keep pedalling
    • By Keep pedalling 23rd Oct 17, 11:04 PM
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    Keep pedalling
    Just dont give him access to all the cash,one of my sons friends was a highly sensible lad who burned through his 27k inheritance in the first year of uni!!!!!!
    Originally posted by maxie014
    The money belongs to the son as soon as he hits 18, the OP had no right to prevent him accessing any of it.
    • brasso
    • By brasso 23rd Oct 17, 11:18 PM
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    • 854 Thanks
    brasso
    All depends on his/your risk appetite, and what his/your objective is.

    If it's preservation of capital at all cost, then put it in a savings account and be satisfied that inflation hasn't reduced it by too much over the year.

    If you actually want to make some money, well, if it was me I would put it all in a small collection of funds with a good recent track record, and hope there will no crash in the next 12 months. Yes, this would be considered foolhardy by many but that simply reflects a difference in attitude. I'm not a very cautious investor, which is why I've generally done very well, year on year. But I've no doubt that I'm due for a rude awakening, just as I had in 2008. Let's hope it's not too soon!

    By and large, the shorter the time frame, the more risky it is to invest. One year is a very short time frame, and no responsible advisor would recommend it. But as I've admitted, I'm not particularly responsible in my approach.
    ----------------------------------------

    I am not an IFA!
    • Voyager2002
    • By Voyager2002 24th Oct 17, 10:03 AM
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    Voyager2002
    A small portion should perhaps go into peer-to-peer lending, providing a decent return (albeit with some risk) yet remaining easily accessible for his studies.
    • steampowered
    • By steampowered 24th Oct 17, 10:29 AM
    • 1,951 Posts
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    steampowered
    He has 1/3 share of a property (rented out) which gives him about £420 month (currently saved into an JISA)
    The property has already made him ineligible for government help through schemes like help to buy. If he wants to buy a house in a few years I suspect it will also mean he gets slammed for additional stamp duty.

    I suspect that holding property is an unwise investment choice for this young man, and that he should be looking to get out of that investment (or at least have an exit route) by the time he wants to a property of his own.

    Not yet sure whether it will make sense for him to get a student loan, as he may be a high income earner in the future, based on his degree choice.
    Originally posted by silvermum
    He should be taking the student loan.

    He will need to take on debt at some point - most likely to afford a place to live - and it makes zero sense to convert student loan repayments into actual debt. Have a good read of http://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes.
    • silvermum
    • By silvermum 24th Oct 17, 9:25 PM
    • 140 Posts
    • 51 Thanks
    silvermum
    Unfortunately, the property was bought before LISAs were launched, so there was no way of knowing that it would be a disadvantage in the future.
    There is a defined exit route for him in the future in that my husband and I would be happy to buy out his share. Alternatively, he could potentially buy out the other shares if he wanted to live in it himself. It is well placed - just a 30-minute commute into London.

    "There are no circumstances in which it makes sense to self-fund uni. He should be taking the student loan."
    Yes, I've read the article on this website, but my understanding is that there are a few circumstances when it may make sense to self-fund uni and I think my son's situation could end up being one of them. His degree has one of the highest graduate starting salaries and he could end up in the 'would end up paying it off within 30 years' group (Approx. 26 years, according to my estimates in the calculator...)
    Given that the interest on student loans currently accrues at 6% (and will rise if inflation keeps rising) then he'd have to be earning at least 6% from his lump sum to 'break even' as it were.

    I agree that he may need to take on debt in the future to e.g. buy a house, but I would hope that mortgage rates might be better than 6%?

    Or am I missing something here?

    I guess it might be worth gambling on a future Labour government writing off student debt/loans I suppose....
    • Tom99
    • By Tom99 25th Oct 17, 2:01 AM
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    Tom99
    I agree that at 6% the student loan interest is high. Maybe take the loan and when your son finishes education decide then what to do then - pay it back or keep it.
    • CKhalvashi
    • By CKhalvashi 25th Oct 17, 3:50 AM
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    CKhalvashi
    The money belongs to the son as soon as he hits 18, the OP had no right to prevent him accessing any of it.
    Originally posted by Keep pedalling
    A more sensible solution would be for OP's son to ask OP to hold the money on trust for him, which I'm sure a fairly sensible 18 year old would do.

    I'm a lot older than 18 and if I have access to money I will be tempted to spend it, where if I don't have it to hand and it'll take some effort to get it I won't be bothered to go to that effort.
    "I kada sanjamo san, nek bude hiljadu raznih boja" (L. Stamenkovic)

    Call me Remainer or Romaniac, but not Remoaner. It's insulting and I have the right to have my voice heard too.

    I can spell, my iPad can't.
    • silvermum
    • By silvermum 25th Oct 17, 11:16 AM
    • 140 Posts
    • 51 Thanks
    silvermum
    I agree that at 6% the student loan interest is high. Maybe take the loan and when your son finishes education decide then what to do then - pay it back or keep it.
    Originally posted by Tom99
    Thanks - yes- that might be the option which keeps the maximum number of options open, whilst incurring only limited interest charges (which could be partially offset by saving/investing his current lump sum.
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