First time savings 18 year old

indigogirl_3

Hi

My 18 year old has his first paid job.
He is living at home still and I would like to encourage him to save something per month whilst his living costs are low. (He's yet to be convinced this is a good idea.)

He has a bank account already where his wages are paid. Lloyds I think

I suggested a separate account where he could access his money if he needed to and earn a little interest but it would be separate from his everyday spending money to reduce the risk of easy spending. I suggested £100 pcm and while I think he might do this I don't think he could commit to it every month for 12 months as his circumstances are likely to change

It seems that the best accounts are bank accounts which would require a switch and defeat the object of separating spends and savings?
The savings accounts all seem to want a lump sum deposit which he doesn't have or require a regular commitment.

Am I barking up the wrong tree suggesting this?

HappyMJ

Just open a savings account with the current bank. Interest rates are so low that you need some seriously high level of savings to see enough return. If he were to save £100 a month into a regular saver (with the ability to withdraw the savings such as TSB) earning 5% and doesn't touch the money then after tax he could expect to get £24 in interest at the end of the 12 months.

A normal easy access savings account might pay 1.5% and after a year of saving £100 a month that would earn £7.20.

AndyT678

If you want to change his behaviour you could also consider making the deal more attractive to him by offering to hold the money for him in return for a much improved return. It might cost you a few quid each month but it could be worth it if it creates a saving habit for him.

indigogirl_3

AndyT678 wrote: »

you could also consider making the deal more attractive to him by offering to hold the money for him in return for a much improved return. .

I tried that first Andyt678. He places a high value on his independence!

jimjames

indigogirl wrote: »

It seems that the best accounts are bank accounts which would require a switch and defeat the object of separating spends and savings?
The savings accounts all seem to want a lump sum deposit which he doesn't have or require a regular commitment.

Am I barking up the wrong tree suggesting this?

Unfortunately as much as you can suggest and advise, the final decision has to come down to him.


There is no reason why the bank account you switch has to be the one where spending is made from. He'll make far more return from switching bonuses than any interest unless he has over £10,000 saved.

Playing_with_Fire_2

If you want to benefit from switching bonuses, he can ask Lloyds for a second current account, and then use that to switch away from.

If you want to encourage the habit of saving and not using the savings, Lloyds have ISA's that you can pay into as you like, the interest is fixed for 2/3 years, and there is a penalty of interest if you withdraw before the two or three years is up (interest around 1.25%). There are also instant access accounts at 0.55%. Neither of these are market leading, but will be easier to set up.

Depending on how much influence you have, I would encourage that he 'pays himself first', ie that he sets up a standing order to go into the savings account the day (or couple of days) after payday and then lives on the rest. My parents encouraged me to do this and I'm so grateful to them.

xylophone

I wonder would he be permitted a TSB Plus account?

If so, would you be in a position to lend him say £1000?

You could pay this into the account and he could repay you a certain amount per month but he would be earning the interest.

It does require a £500 a month pay in but this can be in and out within minutes.

JoeCrystal

Well, the best way to save up for something is to aim for a goal.

Does he have a future plan like saving up for a deposit or something like that? He does have to start thinking about long term planning as well.

Speaking of a long term planning, is he taking any advantage of any company pension provision as well?