What to do with the money 18yo daughter

ClaireB7

My daughter turns 18 next month and her Junior Cash ISA matures. She is in full time education (and we hope she will get to uni next year) so thinking long term savings. She works part time hours and this is below any tax threshold. I've done some reading but wondered how best to continue her savings. I think she plans to save monthly and lock money away to save for her house deposit (we've taught her well!). However, we aren't sure best way to do this. I'm not expecting official financial advice but wondered if a LISA is the right way to go? From what I've read she can only deposit up to £4,000 - which is fine but even if not a tax payer, does she still get the 25% from the Govt? I'm thinking a LISA for deposit and then a second Cash ISA for any other cash she wants to save (that is over the £4,000). She is hoping to save £150-200 per month. What do you think? I guess my question really is - does the 25% tax relief get paid to you if you are not a tax payer? I think if so, we will do two ISAs - 1 x LISA and 1 x Cash that she can withdraw if needed.

MX5huggy

How much is in the JISA? Was it invested (in a fund of stocks and shares) or just cash? 

The LISA will pay the bonus (you don’t need to pay tax to receive it). In the LISA she could hold investments instead of cash over a 5 to 10 year period this could out perform cash.

Are cash ISA rates better than regular savings accounts ATM? Because she has £1000 savings interest tax relief plus she’s not earning so no income tax to pay any way. 

grumiofoundation

If she is looking to save for a house deposit then the LISA is probably the best place for the money (edit - assuming house price limit of 450k won't be an issue) (edit2: as said below). The biggest issue with the LISA is the withdrawal penalty if the money is needed for anything other than a house deposit (or retirement). So really she needs to be sure the money won't be needed for anything other than a house deposit.

As above LISA bonus is unrelated to tax.  

In terms of where to keep other savings cash ISAs are not the only option (as above will she pay tax anyway?) premium bonds might be worth a look. The winnings (with average luck) should be ~0.9% which is better than a lot of savings accounts.

Some current accounts can offer interest rates e.e. virgin 2% on up to 1000 and regular savings accounts can offer higher interest rates but are limited in monthly deposits.

The above assumes cash savings only. Depending on the timescale for buying a property investments might be worth looking at. However it would be sensible to move to cash well in advance of needing the money for a deposit. So say her timescale for buying a house was 6 years but would want to move to cash 4 years before the purchase would only be investing for 2 years - which is a shorter timescale than generally suggested and runs the risk of getting back less than she has put in. 

tebbins

ClaireB7 said:

My daughter turns 18 next month and her Junior Cash ISA matures. She is in full time education (and we hope she will get to uni next year) so thinking long term savings. She works part time hours and this is below any tax threshold. I've done some reading but wondered how best to continue her savings. I think she plans to save monthly and lock money away to save for her house deposit (we've taught her well!). However, we aren't sure best way to do this. I'm not expecting official financial advice but wondered if a LISA is the right way to go? From what I've read she can only deposit up to £4,000 - which is fine but even if not a tax payer, does she still get the 25% from the Govt? I'm thinking a LISA for deposit and then a second Cash ISA for any other cash she wants to save (that is over the £4,000). She is hoping to save £150-200 per month. What do you think? I guess my question really is - does the 25% tax relief get paid to you if you are not a tax payer? I think if so, we will do two ISAs - 1 x LISA and 1 x Cash that she can withdraw if needed.

...
LISA is the best first thing to do and you should prioritise maxing that out every year IMHO. However read the guide, be aware that the legislation can change, and make sure you/she understands that there are penalties for withdrawing money from it not used for her first home purchase, or after age 60, and make sure you/she understand about the house price limits. It works the way you think it works, it's a bonus not a tax relief (https://www.moneysavingexpert.com/savings/lifetime-isas/). 
A cash ISA is debatably worthwhile vs a normal savings account while her earnings are low (https://www.moneysavingexpert.com/savings/best-cash-isa/#tip1). However one advantage of a Cash ISA is that she could build up a large ISA balance that she could transfer to a S&S ISA in future when she is working, if she decides she doesn't need thosr savings in the short-term.

Daliah

Difficult to say without knowing how much money is involved, and what her plans are for the money. But here goes:

LISA first, then the highest paying normal savings account(s) for any remaining money from her JISA, and Regular Savers for her additional monthly savings. She can then channel further funds from her existing savings into her LISA in the coming years.

 A cash ISA would probably not serve any useful purpose as cash ISA rates are even more dire than normal savings rates, and she has a £1,000 savings interest allowance. An S&S ISA would only be a sensible option if she can keep the investment  for the next 5-7 or more years. 

Alexland

If the LISA is to be used towards a distant property purchase then have a good think about the £450k property price limit as the government is unlikely to increase it with any measure of price inflation (HTB ISA buyers are now feeling very constrained by the £250k outside london limit which was generally plenty at the time of launch) and she might be able to afford a bigger property from combining buying power with a friend or future partner. It would be a shame to need to pay the 25% withdrawal charge (sligtly greater than the 25% bonus added) and see the money removed from the account. It's bad enough with HTB ISA holders accepting their purchase will not qualify to claim the bonus.

Eco_Miser

Cash ISAs are worthwhile to very few people. Not only is there £1000 Savings Allowance (0% tax) but before that comes into play for low earners, there's £5000 Starting Rate for Savings (also 0% tax), if earnings are less than the Personal Allowance, and maybe part of the Personal Allowance as well.

tebbins suggests building up a balance for future transfer to S&S ISA, but the £20,000 annual ISA allowance dwarfs the £2,400 pa suggested saving rate.

After the LISA, she should save wherever is paying the best rates,, whether that i (multiple) current accounts, Regular (Monthly) Savings accounts, fixed rate, or easy access accounts.

Always remembering she needs short term savings as well, to ensure she does not need to borrow to cover essential spending.

MoJoeGo

Alexland said:

If the LISA is to be used towards a distant property purchase then have a good think about the £450k property price limit as the government is unlikely to increase it with any measure of price inflation (HTB ISA buyers are now feeling very constrained by the £250k outside london limit which was generally plenty at the time of launch) and she might be able to afford a bigger property from combining buying power with a friend or future partner. It would be a shame to need to pay the 25% withdrawal charge (sligtly greater than the 25% bonus added) and see the money removed from the account. It's bad enough with HTB ISA holders accepting their purchase will not qualify to claim the bonus.

This is exactly why my 18yo has held off opening a LISA - if she does decide to buy anywhere near where we live, then 450k wouldn't get an awful lot. She's also considering working abroad after studying so quite possible she may not even buy her first property in this country (and I believe that if you do buy abroad, it removes your LISA house bonus eligibility...)

It's one of those accounts that initially looks like a no-brainer until you think about the possible scenarios...

Albermarle

 I think she plans to save monthly and lock money away to save for her house deposit (we've taught her well!). 

That's great but you and she should not forget you are only young once !

A car and driving lessons is the priority for a a lot of 17/18 year olds . Plus once she gets to Uni , the bright lights might turn her head as well . She will not find many of her peers saving for a house deposit , more likely for the next night out 

cloud_dog

We are hoping for a two prong approach for the cash savings JISA and the S&S JISA.

Cash JISA - They can do with as the please*.

S&S JISA - We will open a cash LISA and deposit £1, the S&S JISA converted to a S&S ISA will hopefully* remain invested and when future plans start to be firmed up on re-invested within LISA (I need to check out LISA providers as I have heard of restrictions on transfers (cash to S&S)).

* - I know all of the money is the ownership of the child/adult but I am confident (based on less than a year to go) that they will listen and take onboard our advise.  Time will tell