Long term saving for 17 year old

wozo66

Hi
My 17 year old daughter has been lucky enough to find work and I am keen for her to begin saving, particularly for her retirement. Can anyone recommend or advise a good starting point where her pension pot can be taken from her bank account by direct debit/standing order and what sort of amount would be a good starting point. Her annual income will be around £5000 to start.

Many Thanks

Mike

Lokolo

At 17. On £5k a year, she should not be thinking of contributing to her pension.

At her age she should be saving, but into her pension no.

Although people say start as early as possible, there is a point where its over doing it.

Does the company she work for have a pension scheme, this might change things?

wozo66

Thanks Lokolo

I only suggested a pension as I have been paying into mine since I was 19 - any suggestions on a long term savings plan if not a pension?

Many Thanks for your speedy response

Mike

Lokolo

Yeh it's a good idea to start one ASAP but at 17 I was still thinking about things such as saving for a car, a house deposit, uni.

If I were her I would set up 2 savings plans. Short term and long term. Short term things such as house deposit, car etc. which she can save in her Cash ISA allowance. Assuming her wages will go above her personal limit, she will then have to pay tax on any interest outside a Cash ISA.

The really long term thing, she can put some in her pension. I take it, she doesn't (or you) understand a lot about investments so it kind of rules out Stocks and Shares ISA unless you go and see an IFA.

Does her company have a pension scheme? If they contribute I may change my mind about putting some in there.

Batchy

if she is earning only 5k, then it makes little sense to contribute to a pension.

I think you can still get free tax added up to 3600 or something like that, so you stilll get a tax benefit, but if I was her, i'd be saving but not paying into a pension. I think quality of life when you younger is far more important. It makes you who you are!

jamesd

For long term experience now a stocks and shares ISA would be a better way to go. 17 is too young for that but she'll need a while to build up an emergency fund and that can go into a cash ISA.

However, you're writing about a car and university and those are short to medium term things, not long term, so that implies that for the moment savings are more suitable than investments.

For her situation a regular saver account seems likely to be best since she's not a tax payer and won't benefit from the cash ISA tax break.

LeeSouthEast

Get her into the habit of saving 20% of her income, but I agree a pension is not the way to go right now.

vbm

It depends on her goals. But if the idea is simply to increase capital over the long term than an equity ISA would seem the best bet.