Monthly investment for an 18 year old - cash LISA, S&S LISA, S&S ISA, something else?

Genevieve29

My son is 18 years old. He is working full time and has joined his company pension scheme. He currently lives with me (which is unlikely to change for a few years) and has enough cash savings for his immediate needs and to buy a car once he passes his driving test.
He has quite a lot of surplus income each month and wants to start saving/investing £300 per month for the longer term i.e. at least 5 years. We have done a bit of research and he's thinking maybe a LISA. Also, it seems a good time to start to invest in the stock market.
I'm trying to instil into my children that they need to start young with pensions/savings/investments so I want this to be a positive experience for him - not to feel like it's 'too difficult', to find out he's been ripped off with high charges or to find he's chosen the wrong type of product.
Any thoughts? 
Thanks

xylophone

If he hopes to buy a property one day, then a LISA would be a good idea.
https://www.moneysavingexpert.com/savings/lifetime-isas/

In terms of a stocks and shares ISA, Vanguard might be suitable.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa?cmpgn=PS0220UKBABIS0001EN&gclid=EAIaIQobChMI-t_mlIPo6AIVjLHtCh3uzgkKEAAYASAAEgKi3_D_BwE&gclsrc=aw.ds

https://monevator.com/using-vanguard-lifestrategy-funds-life/

dcs34

For £400 a month he could look at splitting payments between:
- A regular saver paying 1.5-4% | Low risk, guaranteed rate or return
- A LISA, either cash (1%) or S&S (var%) | Low/medium risk with unparalleled 25% Gov top-up, but heavy restrictions on withdrawals
- Increasing pension contributions to maximise employer's contributions
- Other long term (think 10-15 years rather than 5) investment

Albermarle

The shorter the time frame , the lower the risk should be taken and vice versa.
<5 years - cash savings of some kind ( could be via a LISA)
5-10 years - medium risk investments
> 10 years - higher risk investments 
> 40 years ( ie pension ) 100% equities or similar . Has you checked what his pension is invested in , as it might not be suitable for such a young man.

Genevieve29

Thanks everyone who's replied.
I'd not thought of a regular saver, I'll look into it.
And, I'll get him to check how his pension is invested.

macman

A LISA, because no other investment gives you a 25% boost from the state.

grumiofoundation

macman said:

A LISA, because no other investment gives you a 25% boost from the state.

As a basic rate tax payer paying into a pension gives you the same boost (albeit with likelihood of some tax on the way out). Higher rate initially gets a higher boost. 

Also technically a "LISA" is not an investment.

Cash LISA - no risk to capital
S and S LISA - risk is determined not by the fact its a LISA but by the investments you choose within it (in the same way you don't invest in a "pension" but you invest within a pension).  

cloud_dog

Yes but....the OPs son is 18, is in all likelihood likely to but a property at some point in their future, and you can't use pension money to help purchase a property 😁

WRT retirement planning a LISA is the more efficient vehicle to use for a BRT payer (without Sal Sac) due to the non-taxation on withdrawal after age 60.

steampowered

Given the amount of money involved it doesn't matter very much what choice your son makes. The most important thing is that he develops a bit of financial literacy by doing his own research and understanding the different options open to him.

Personally, I would be pushing the son towards a stocks & shares ISA, for at least some of the money. I would encourage him to select an appropriate balanced investment fund. A basic understanding of how to go about investing, and a healthy attitude to risk, are really important for building wealth. 

This article is a great start for understanding what level of risk is actually involved with stocks & shares, and why the advice given by Albermarle is far too conservative for a 18 year old: https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/. 

A lifetime ISA could be a better option if the money is ear marked for a property, and your son won't be looking to buy in London. However that does mean locking the money away given that there are withdrawal penalties. Personally I'm not sure that is appropriate for an 18 year old as he might to put some of the money into a cash savings account to ear mark it for spending such as holidays, treats etc.