Seeking advice with savings options for my inheritance

stephenm1

Hello,

I have recently inherited £30000 from a relative. In short I would like some advice as to what is the most beneficial way to save the money.
I'm aged 17, currently still at high school and going onto university next year. I would be willing to tie it up for a maximum period of 3 years.
With my very limited knowledge of finance I am hoping someone can give me some advice as to the best course of action to maximise the profitability of the sum.

Many thanks for your time,
Stephen

financial_illiterate

Yorkshire Bank or Clydesdale Bank 4.3% three year fix. Not sure if early withdrawals are possible.

If you're intending to hang onto some or part of the money long term after you start work, it may be worth filling an ISA each year as well.

ses6jwg

£5340 into the best paying instant access ISA you can find.

£12-15kish into the best paying instant access online savings account you can find.

Remainder into the best paying 3 year fixed rate bond you can find.

Move the full ISA allowance from the instant saver to the ISA on the 6th of April each year and keep transferring the ISA to get the best rate on the ISA.

Doing it this way means when you leave education and become a taxpayer, you will have a nice headstart on building up a tax free savings pot.

property.advert

Get a relative to guarantee a mortgage and you put £20k down as a deposit. You then live in the property renting rooms out to other students.

You come out of university with much reduced debt, the property may have gone up in value and you haven't been living in a craphole for 3 years.

stephenm1

property.advert wrote: »

Get a relative to guarantee a mortgage and you put £20k down as a deposit. You then live in the property renting rooms out to other students.

You come out of university with much reduced debt, the property may have gone up in value and you haven't been living in a craphole for 3 years.

Thankfully in Scotland we don't yet pay any fee's I'm also living close to my university so shall be staying at home to further cut my costs, i don't forecast myself with much, if any debt at the end of uni.

Thanks, ses6jwg, for the reply. It is extremely helpful to me

Can i just ask though, to the best of my knowledge i am not currently paying tax on my savings as i am under the age of 18 and still in full time education, will this change once i become 18 or is it when i am earning a wage that i start paying tax. If I'm not going to be paying tax for the next few years perhaps there are better options than taking out an ISA?

Many thanks once again

kidmugsy

The point of filling up the cash ISAs is so that the interest is untaxed once you are earning enough to be a taxpayer i.e. probably when you graduate.

Another fine investment for you would be the ns&i Index-Linked Savings Certificates - they protect the spending power of your capital. They are not on sale at the moment but might well be on sale in April or May. Keep your eyes open for them, and keep plenty of cash on instant access ready for use.

property.advert

stephenm1 wrote: »

Thankfully in Scotland we don't yet pay any fee's I'm also living close to my university so shall be staying at home to further cut my costs, i don't forecast myself with much, if any debt at the end of uni.

Doesn't matter. Buying and renting out would then just give you an income instead.

Also, don't live at home. This is the time to grow up and move out. When your mates are out on the pull and unencumbered by mama and papa, you'll be as envious as hell and that extra £50/75/100 or whatever a week they pay in rent will always seem well spent.

Time to fly the nest.

atush

It will be cheaper to stay at home, but a lot less fun and you will feel less of the community spirit. Consider moving in with friends in year2. You can always go home some nights and mooch Dinner from Mom.

MoneySavingUser

stephenm1 wrote: »

Can i just ask though, to the best of my knowledge i am not currently paying tax on my savings as i am under the age of 18 and still in full time education, will this change once i become 18 or is it when i am earning a wage that i start paying tax. If I'm not going to be paying tax for the next few years perhaps there are better options than taking out an ISA?

Many thanks once again

You pay tax once your income goes over the personal allowance http://www.hmrc.gov.uk/incometax/personal-allow.htm

and you should open an ISA anyway as the benefit in future years is cumulative

Tuesday_Tenor

I'd generally concur with ses6jwg's excellent advice, though I think I'd do this a bit differently:

>>>> Remainder into the best paying 3 year fixed rate bond you can find.

Of the remaining 10-12K-ish lump, I think I'd split this 20%/30%/50% between 1-year, 2-year and 3-year fixed rate savings. You'll lose a bit of interest (probably, though not necessarily if interest rates rise over the next 3 years) but you gain a bit more flexibility. During the next 3 years you might want to have driving lessons, buy a car, or travel a bit. So having fixed accounts maturing at different times can be useful.

Although you DO also have the flexibilty of breaking into you ISA for emergencies or changes of plan, it'd be a shame to do so when you have the possibility of building up a tax-free pot of approx £16K in an ISA over 3 years. This is something not many people of your age have when starting their working life.

At your age I wouldn't have wanted the responsibility of owning a house or, even more potentially hassle-ridden, being a landlord! Do consider moving away from home, though, if the time seems right. Value the chance to gain practical independence from your parents, as well as the financial independence you'll already enjoy.

Good on you for thinking carefully about this and not splashing out straightaway. You could allow yourself one special treat, though, with grateful thanks to the relative who was so generous to you.