what sort of ISA?

nickyh_2

I am about to receive £62k in redundancy money that I will be using over the next 6 years for my 3 sons accomodation at university ( I reckon £5k each per year).

I thought I could invest money this tax year and next in ISA's in both my husband's and my own name. The question is should this be in a cash ISA or a maxi?

Any other ideas how I should hold this money also appreciated!
Nicky

dunstonh

There is a world of difference between cash ISAs and Equity ISAs. You need to decide which one is most suitable for your goals and attitude to investment risk. This can often be influenced by time scale. It may be a case of doing both cash ISAs and equity ISAs within the MINI rules.

cheerfulcat

Hi, nickyh,

As you plan to use this money quite soon, cash ISAs and deposit accounts are really the only sensible option.

ReportInvestor

One or two of your sons will presumably be 16 already.

So you can gift them £3K for a cash ISA this year and £3K for a cash ISA next year.

And if they spend it before they go to college you don't give them any more.

Cash ISAs are probably best on the timescale & savings goal you give - and it's even better if you can invest more money in them, which this route makes possible.

nickyh_2

ReportInvestor wrote:

One or two of your sons will presumably be 16 already.

So you can gift them £3K for a cash ISA this year and £3K for a cash ISA next year.

And if they spend it before they go to college you don't give them any more.

Cash ISAs are probably best on the timescale & savings goal you give - and it's even better if you can invest more money in them, which this route makes possible.

All the boys are over 16 - can I gift them £3k each this year and next?

ReportInvestor

Yes

So with 2 X £3k ISAs for you and your husband as well, you can have invested £30K in Cash ISAs by the end of the first week in April 2006.

April 5th = last day of 2005/6 tax year.
April 6th = first day of 2006/7 tax year

That leaves you with 2x £4K mini share ISA allowances for you and your husband = another £16K.

But only use these if you would have invested in shares anyway, even if the ISA wrapper had not existed.

We know nothing of the rest of your family's finances, but if this money is your main savings then I wouldn't put £16K into the stock market all in one go, but might look for a regular saving scheme within an ISA to drip feed a portion of that money into the market. This reduces risk but gives you some chance of higher returns on part of your savings.

dunstonh

I cannot see why a mixture cannot be considered at this time. After all, some of the funds are not required for 6 years. The 5-6 year chunk could utilise the equity ISA side and if risk is a concern, then cautious funds could be selected.

ReportInvestor

Fair 'nuff. But probably not the whole £16K?

Wouldn't the charges on cautious funds over just 5-6 years be self-defeating? Better to invest in a decent savings account and then move another £15K into Cash ISAs after April 6th 2007 - at which point you could also pay much of the rest of the non-Cash ISA cash direct to the boys for accommodation - if they can be trusted to leave the original ISAs untouched.

dunstonh

Fair 'nuff. But probably not the whole £16K?

I agree, not the whole 16k. Basically the amount needed for 5/6 years time perhaps.

Wouldn't the charges on cautious funds over just 5-6 years be self-defeating? Better to invest in a decent savings account and then move another £15K into Cash ISAs after April 6th 2007

I wouldnt say so. A half decent cautious portfolio seems to average 7%-10% long term after charges (ignoring last 24 months when things have been so much better). Obviously, if you buy at full cost, then it would make an impact. However, we know that there is no need to do that.