How and where to save around £18k?! Please help!

wiiinning

Hi all, I really hope you can help me as I am clueless!

My friend has always been pretty money savvy but I am concerned she knows very little about savings and where to save.

Basically she is on income support and has a little boy who is nearly 6. She went through a really really rough time and is now doing an Open Uni course whilst her son is at school. She has just been awarded just over £18,000 compensation. I know she wants to learn to drive, buy a car and pay for the insurance, so thats around £2000-£3000 for the car, around £1500 for the insurance (based on a few quotes she got) and however much it costs to start driving lessons and passing (if we include tax, mot, the liscence itself, the test and theory test etc) lets say £1000. So that is around £5000 gone already.

My question is, what and where and how should the other £13,000 be dealt with?! Also, she is concerned it will effect her benefits and the funding for her university degree. Is this the case? If so, can it be avoided?

I hope someone can give me advice Please no comments about she should be working and should have benefits taken away as she worked from 13 until 21 and has suffered a very awful time, without the benefits she would not be able to afford to study her degree.

Many Thanks (in advance)

sooty1234

What does she want to do with the other money, how long does she want to lock it away, what's her attitude to risk?

wiiinning

She wants to be able to access some of it, maybe a few grand. There is definitely £10,000 to play with, erm I think she would be scared of losing it if the risk was too high... The £10,000 does not need to be instantly accessible though, think thats her future for her and her son, she is thinking of putting it towards a deposit on a house once shes stabilised a career. What did you have in mind?
Thank you for your reply

wiiinning

Does anyone know what she can do?? I don't want to give her the wrong advice, and I definitely don't want her to waste it Thanks

Wilma33

What benefits is she getting. I think having £18K will affected them. Although you might be better asking that part of the question on the benefits board or looking on direct.gov. The fact it is compensation (through the courts?) might make a difference.

Wilma33

I've just looked on direct.gov and income support starts reducing if you have savings over £6K. She needs to let the benefits people know about this money. And the people funding her study.

atush

If she spends some on a car, and puts some in her child's name she should be OK re:benefits. But 18K if left in savings would affect things.

One place she could save that would take it out of benefit range would be a pension (2880 grossed up to 3600 after tax releif)- but can't touch it til age 55 so wouldn't help with house deposit.

So she should make some decisions and spedn some (on the car, ins, prepay for lessons, stakeholder pension, then tell the Benefits people what is left. It was afterall compensation for soemthing (we don't knwo what) and so can be spent in part. Noramlly I wold have said save every penny.

sooty1234

First thing look on here and max out her cash isa for this year.

wiiinning

Thank you for the replies. She receives income support, housing benefit, council tax benefit and child tax credits I think... She received the compensation from the Criminal Injuries Compensation Authority which is government funded I believe, not sure if that makes a difference. I looked on direct.gov but couldn't see anything about when savings are from something like that.

atush

I think a trip to the CAB pronto is required.

pmlindyloo

As far as I am aware the Criminal Injuries Compensation award would be treated as capital as far as benefits such as IS, HB and CTB are concerned.

I think that the money can be put into a trust where you can be paid a monthly sum. The capital in the trust would then not be counted as capital for the purposes of those benefits but the monthly income from the trust would.

I am not sure whether buying a car etc would be seen as deprivation of capital.

I second getting some specialist advice. You should be using a CAB Welfare and Benefits specialist if you choose to go to CAB. Google CAB and find your nearest one that does have a W & B specialist.