Best ISA or savings for for 18 year old

cambs1999

My 18 year old son is looking to open an ISA. We were looking at Vanguard but I’m a bit confused by the difference between the Vanguard Lifestrategy Profile or the Vanguard Global All Cap.

I’m thinking at his age he should be looking at investing it all in equities? 

Can anyone give me some guidance as to the difference between them and what might be a better option for an 18 year old.

He is also looking at opening a LISA to save towards a house deposit.

He does have around £12k to invest that is currently just sitting in an everyday savings account. 

Also i’m not sure whether it’s better to invest the £12k all in one go - or spread it between a ISA & LISA so maybe the £4K in a LISA/£8k ISA to get the LISA top up - or drip feed the money in over a year. 

The LISA he is considering is the Newcastle BS but then I’m not sure whether for now just to stick with a LISA but then don’t want him to miss out on the government top up.

I’ve been saving the £12k for him for a number of years so want to make sure we make the best use of it. 

He is working on average 25 hrs pw but it’s not a permanent contract and he will not be going to Uni.

The other option is he opens a pension but my feeling is that for now he should concentrate on adding to his savings for a house deposit. 

eskbanker

LifeStrategy is a range of multi-asset funds of funds, combining equities (in various percentages) with bonds, that have historically been used to dampen volatility, whereas Global All Cap is 100% equities and therefore further up the risk scale.

However, the fundamental question is whether or not investing is suitable for him if he's trying to accumulate a property deposit, as investing is generally considered a long-term proposition - when would he envisage buying?

A LISA will undoubtedly be part of the right answer though (unless he's buying within a year)!

grumiofoundation

When will he be looking to buy? Will he be using all the 12k as a deposit? 

If the money is earmarked for a house deposit reinvesting it carries risk (especially in 100% equities). 

By April 2023 12k can be within LISA.  

jay1804

I'm not sure if you know but there's a Lifetime Isa you can get through Multiply  it offers 1.5% interest until April 2022, I recently switched my Moneybox LISA, and it seems good so far.

cambs1999

Thanks for your replies. 

I hadn’t heard of the multiply LISA so thanks for that!

I suppose he will be looking to buy in around 5 years, maybe a bit longer as we hope to be able to give him a much larger deposit from one of our pension lump sums but this won’t be available for another 5-8 years.

The more people give me their opinions the clearer his options become to me, along with the pro/cons.

I was thinking of at least getting him to open a ISA with Vanguard and even if he only put £50 or so in it each month just to get in the habit of saving.

So much to think about with him as then of course it’s whether he opens a cash or S&S LISA

I have always been very risk adverse but with the small sums involved and his age he could be more aggressive (not with the £12k).

I suppose I’m just a bit worried if he opens a LISA and after time he decides not to buy/houses become too unaffordable. 

I just need to have it clear in my mind all his options.

Thanks. 

eskbanker

cambs1999 said:

I was thinking of at least getting him to open a ISA with Vanguard and even if he only put £50 or so in it each month just to get in the habit of saving.

At the risk of labouring the point, he needs to understand the difference between saving and investing!

cambs1999 said:

I have always been very risk adverse but with the small sums involved and his age he could be more aggressive (not with the £12k).

Even though he's young, that shouldn't influence saving/investment choices unless it's a very long time until he's likely to need to get his hands on the money....

grumiofoundation

jay1804 said:

I'm not sure if you know but there's a Lifetime Isa you can get through Multiply  it offers 1.5% interest until April 2022, I recently switched my Moneybox LISA, and it seems good so far.

Multiply Lifetime ISA appears to just be a Unity Mutual lifetime ISA with a bit of branding and an app  (which despite the marketing is technically a stocks and shares LISA).

Previous discussions:
https://www.moneysavingexpert.com/news/2018/11/unity-mutual-launches-new-lifetime-isa/
https://forums.moneysavingexpert.com/discussion/5920966/unity-mutual-launches-new-type-of-lifetime-isa-mse-news/p1
https://forums.moneysavingexpert.com/discussion/6152061/unity-mutual-lisa/p1

grumiofoundation

I suppose he will be looking to buy in around 5 years, maybe a bit longer as we hope to be able to give him a much larger deposit from one of our pension lump sums but this won’t be available for another 5-8 years.

The more people give me their opinions the clearer his options become to me, along with the pro/cons.

Obviously he is in a lucky position where it sounds like he can afford to take far more investment risk that most because this isn't all/any of his deposit money. Meaning his risk profile can therefore be more far agressive than someone without the same back-up.

I was thinking of at least getting him to open a ISA with Vanguard and even if he only put £50 or so in it each month just to get in the habit of saving.

As above vanguard don't offer savings products. 
Getting him to save £50 a month in an investment that could drop 50% if he isn't aware of this risk could put him off investing for a long time. 

I have always been very risk adverse but with the small sums involved and his age he could be more aggressive (not with the £12k).

Sounds like investing £50 a month may well be neither here not there if you are giving him a 'much larger' deposit in the future. 

I suppose I’m just a bit worried if he opens a LISA and after time he decides not to buy/houses become too unaffordable. 

I just need to have it clear in my mind all his options.

Then sounds like maybe he shouldn't open one. The lifetime is a great product for someone who knows they are going to use the money to buy a house. If they might need to withdraw the money not for a house and before retirment then not so much!

The assumption made in earlier comments will have been that he wants to open a LISA to save to buy a house. Presuming he is fully involved in these discussions.* In the event house purchase is not a guaranteed outcome then LISA may not be best option. 

*Same applies to investing vs saving he should understand the risks. 

Underlined the above as (I am sure this is the case) what is really important is he has clear in his mind the options and understands the risks. 


In the event LISA/Investments aren't suitable/decision isn't ready to be made in the meantime premium bonds are probably a better option than savings account.