Best Place for £60,000?

Durban

In just under a year I will have £60,000 from the sale of a BTL.

My intention with this money is to keep it , and split it between my 3 children as help towards a house deposit when they are in a position / want to buy. So each would have £20,000

They range from early to late 20's and will all be wanting to buy at different times in their lives.

So one may be in a position to buy in 2 - 3 years and the others maybe not for 10 years.
I would really like to put the money in a VLS 60/40 as I am worried about inflation.

I would like to keep control of the money until they wanted to buy. so that it could not be used for anything else.

Should I split the money and have half in VLS 60/40 and then put the rest into something safer , and if so what ?

Many thanks

Zero_Sum

You could give them money but put into LISA. That way it has to be spent on either house or retirement. And you get a 25% top up from government.

Alexland

Zero_Sum wrote: »

You could give them money but put into LISA. That way it has to be spent on either house or retirement. And you get a 25% top up from government.

Or they might just withdraw it and pay the penalty greater than the bonus...

Durban

Alexland wrote: »

Or they might just withdraw it and pay the penalty greater than the bonus...

Yes , thank you Alexland.

I know it would be better in a LISA.

Of the three children , two of them wouldn't touch any of the money until they were ready to buy and of those two , one of them already pays regularly into her LISA. I would probably feed her part of the money to her LISA up to the maximum allowed.

However, the other one , not so sure , could be tempted and I wouldn't want to take the risk.

Any other ideas of where to put it or split?

xylophone

ISA with Vanguard?

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

If you get the cash before the end of the tax year 19/20, you could potentially get £40,000 into a tax shelter by end April 2020.

Why not ask the daughters without LISA to open one as soon as possible now and start to make their own contributions?

This would show some financial responsibility on the part of your "flighty" daughter?

You might then make a gift of £4000 into each daughter's LISA in 19/20, and divide the £8000 between the LISAs for 20/21?

You might continue gifting in subsequent years.

20SmthngSver

You could put into a Lifetime ISA for a house or pension, but they'd have to open it in their names.

I get that you want them to use it wisely, but if you're giving it to them, it does become their right to do with it what they choose. I suggest you do it in trust, or you simply keep it and give it when they need it.

Giving it to them without your control over withdrawals also means they'd have the flexibility to save it and manage it and move it where they want to make it work for them.

Durban

Thank you for your replies.

The two daughters are sensible with their money. The elder one has her own small share portfolio and owns half of a BTL flat in her home town as she couldn’t afford a property in London where she works or the South East and the younger has a LISA. My son, is not so good with money but I’m sure he will be one day. I only became financially savvy in my mid 30’s

20sthingsaver. Yes that is exactly what I want to do, is give it when they need it towards a house deposit

This is why I am trying to ascertain the best place to put this £60,000, to keep up with inflation, possibly grow a little but also overcome the dilemma of it all being needed over a varying time span.

Rightly or wrongly , I don’t want to risk it being used or drawn out for anything other than a house deposit if and when they’re ready.

I think I may feed my daughters LISA up to maximum. Get the other daughter to open a LISA and do the same. Maybe with the rest VLS 60/40
Does this sound reasonable?

Thanks again

Alexland

Would it help with the son if you gave them all the money to drip feed into their LISAs at £333 per month - and made it clear that you want to see regular evidence that the money and bonuses are still in their accounts in order for the gifts to continue?

That way you are treating them all equally and your son might learn some financial restraint as he will realise the money will only continue to be added if he contributes it into his LISA. If he messes you about he will still get the remaining share later and will have missed out on the government bonuses.

Is there any possibility that they will want to buy their first property above the £450k limit (perhaps pooling money with a partner) or outside the UK?

If one daughter already owns a property then would their LISA be for retirement in s&s?

Alex

Durban

Alexland wrote: »

Would it help with the son if you gave them all the money to drip feed into their LISAs at £333 per month - and made it clear that you want to see regular evidence that the money and bonuses are still in their accounts in order for the gifts to continue?

That way you are treating them all equally and your son might learn some financial restraint as he will realise the money will only continue to be added if he contributes it into his LISA. If he messes you about he will still get the remaining share later and will have missed out on the government bonuses.

Is there any possibility that they will want to buy their first property above the £450k limit (perhaps pooling money with a partner) or outside the UK?

If one daughter already owns a property then would their LISA be for retirement in s&s?

Alex

Thanks Alexland , I have read a lot of your posts over time and find that you offer excellent advice.

Although the elder daughter owns half of a BTL flat, with me, it is actually solely in my name , with a declaration of trust that half is hers. One of the reasons being that we didn’t want her to lose any first time buyer advantages

Not sure if I would feel comfortable about wanting to see evidence etc of their accounts in order for the money to continue. I will give that some serious thought LISA sounds definitely the more financially advantageous choice.

Ideally, I would like to drip feed into both daughters LISA’s but rather give my son just the lump sum £20,000 when he’s ready and able to buy a property and much more financially mature.

So it could be now I’m just needing to find a place to keep my son’a £20,000 safe from inflation and not the whole £60,000.

Any thoughts?

Thanks again, it is becoming clearer

Alexland

Durban wrote: »

Ideally, I would like to drip feed into both daughters LISA’s but rather give my son just the lump sum £20,000 when he’s ready and able to buy a property and much more financially mature.

To satisfy money laundering requirements ISA managers will often want to see the contributions coming from the individual so you may need to transfer the money into their bank account each month and they would then onward contribute the money into their LISAs.

It will take a few years to cycle the £20ks into their LISAs at £4k pa. If they are also saving in parallel they might find the interest rate of an HTB ISA attractive. They can hold both accounts (although be careful incase they are already contributing into a Cash ISA in the same tax year) and just close the HTB ISA without penalty when they are ready to use the LISA towards the property purchase.

Durban wrote: »

So it could be now I’m just needing to find a place to keep my son’a £20,000 safe from inflation and not the whole £60,000.

If you think it is highly likely that the son's money will not be needed for at least 5 years then investing £20k in VLS60 (eg lump sum in an iWeb S&S ISA) may be suitable as the probability of a nominal loss (so you are withdrawing less) is fairly low. However to have much certainty that you will have a return greater than cash and maintain the spending power (relative to inflation) it should ideally be invested for 7 to 10 years+. You may wish to consider using a target date fund such as VTR2025 which is currently 61% equities and would automatically reduce risk as the target withdrawal date approaches?

However it does mean that the daughters will end up with £25k + interest and the son will end up with only £20k + market return. You may wish to ringfence the interest you earn on the daughters cash while it is still in your name (before it is gradually transferred) and use that to even-up the situation later once you know the extent of the positive (or negative) market return?

Alex

Durban

Excellent advice as always.
Thanks Alexland