18yo organising savings, advice and thoughts needed!

secretbeetroot

Hi all,

I'm 18 yrs old and just about to start uni. I'm doing a 3yr undergrad course but looking to do either a postgrad course or a teaching PGCE afterwards (another 1-2yrs). I figured I'd have a look at my savings after my junior ISA matured and I'm trying to work out where to put my money, what accounts etc.

I have £3800 in my junior ISA that needs moving, £300 in a H2B ISA, £200 in a standard savings acc and £1300 in my current acc. (all before student finance - I'm expecting to have ~£900 this year after paying for uni accom). Parents are looking to contribute towards living costs plus I'll probably get a part time job, so I can afford to put the majority of my savings away for now. Also I've got no debts and no regular bills at the moment (parents pay for phone contract, don't have a car etc). I'm not worried about online-only accounts or if there's no branch near me as I'm pretty tech-savvy. 

My thoughts are this:

• Transfer my H2B to a LISA and top it up to £2000 as I'm hoping to buy a house some time after uni and I figure it may as well be earning bonuses whilst I wait - Moneybox LISA
• Put £2000 into a 3yr fixed ISA so that its there after my uni course finishes for if I need to move, buy a car etc and it stops me from dipping into it - UBL 2yr fixed ISA
• Put anything left over apart from around £500 (as spending money in current account) into an easy access savings acc for emergencies as it will earn better than the top easy access ISA and I shouldn't have to worry about tax (due to PSA) - Tesco Bank Internet Saver

Any advice would be massively appreciated, even to tell me I'm doing everything wrong!

Thanks!!

grumiofoundation

The drawback to lifetime ISA is the penalty on withdrawal. You may be planning to buy a property in the UK now but by the time you have finished your degree that may change? (also is there a risk the 450k limit starts to become an issue - especially if you buy with someone else).

Since it doesn't seem you will fill the LISA (i.e. £4000) in each tax year I don't think you need rush to fill up the LISA now. Might be worth keeping it accessible* (penalty-free) in case of emergencies?

secretbeetroot

grumiofoundation said:

The drawback to lifetime ISA is the penalty on withdrawal. You may be planning to buy a property in the UK now but by the time you have finished your degree that may change? (also is there a risk the 450k limit starts to become an issue - especially if you buy with someone else).

Since it doesn't seem you will fill the LISA (i.e. £4000) in each tax year I don't think you need rush to fill up the LISA now. Might be worth keeping it accessible* (penalty-free) in case of emergencies?

Thanks for your reply, would you say to leave it as a H2B ISA for now or still transfer it but put less money into it to leave the rest accessible? I just don't see the point in keeping the H2B as I'll only be 27 by the time limit for the bonus and probably won't be buying a house by then.

Alexland

secretbeetroot said:

• Put £2000 into a 3yr fixed ISA so that its there after my uni course finishes for if I need to move, buy a car etc and it stops me from dipping into it - UBL 2yr fixed ISA
  

For the cash ISA to be valid the provider must allow you access to your money even on a fixed term product although there is usually a penalty to discourage you from doing that. I wouldn't suggest you use a product to deny yourself access to this money as unexpected things might happen in the next few years and you might find you need access - it's always good to have a few thousand (or more when your commitments grow) in accessible savings. You can get some pretty good rates on small amounts of savings held in bank current accounts Virgin etc.

secretbeetroot said:

Thanks for your reply, would you say to leave it as a H2B ISA for now or still transfer it but put less money into it to leave the rest accessible? I just don't see the point in keeping the H2B as I'll only be 27 by the time limit for the bonus and probably won't be buying a house by then.

If you don't expect to buy property for another decade then you might want to very carefully consider if the £450k property price cap on the LISA will be restrictive for where you might want to buy that far into the future. For example if property prices were to rise around 50% over that time then the £450k would only buy you what £300k could buy you today.

grumiofoundation

secretbeetroot said:

grumiofoundation said:

The drawback to lifetime ISA is the penalty on withdrawal. You may be planning to buy a property in the UK now but by the time you have finished your degree that may change? (also is there a risk the 450k limit starts to become an issue - especially if you buy with someone else).

Since it doesn't seem you will fill the LISA (i.e. £4000) in each tax year I don't think you need rush to fill up the LISA now. Might be worth keeping it accessible* (penalty-free) in case of emergencies?

Thanks for your reply, would you say to leave it as a H2B ISA for now or still transfer it but put less money into it to leave the rest accessible? I just don't see the point in keeping the H2B as I'll only be 27 by the time limit for the bonus and probably won't be buying a house by then.

Would echo the above if you are not looking at buying for >10 years in the future the 450k price cap (which there is no guarantee will be increased) may well become an issue (especially if buying with someone else). 

I would certainly recommend opening a lifetime ISA now with a minimal amount. But for the reasons explained above there is a risk to you in filling the ISA as much as you can and until you are in a situation where the £4000 limit becomes an issue I would probably be looking at keeping the money out of the LISA for now. 

Albermarle

• Put anything left over apart from around £500 (as spending money in current account) into an easy access savings acc for emergencies as it will earn better than the top easy access ISA and I shouldn't have to worry about tax (due to PSA) - Tesco Bank Internet Saver

This is correct , you should be able to get a better rate with a Non ISA savings account. So you should follow the same logic with the fixed rate savings account 

Put £2000 into a 3yr fixed ISA so that its there after my uni course finishes

Here is one of the useful comparison sites  Moneyfacts.co.uk | Compare Savings, ISAs, Mortgages & More

Eco_Miser

For a person with a low non-savings, non-investment income, there is up to £5000 Starting Rate for Savings zero % tax, as well as the PSA, to avoid tax on interest, and you are allowed to add £20,000 a year to ISAs, so until that £20k becomes relevant, there's no point in ISAs, except the LISA, and an S&S ISA should you wish to invest rather than save (probably not in you position).

As mentioned, certain current account such as Virgin Money pay better interest than savings accounts, and are automatically instant access.

You might not think of using Reguar Savings accounts, since you won't be in a position to save regularly, but again they tend to pay better interest, and can be operated by cycling your money around rather than adding genuinely new money.  https://forums.moneysavingexpert.com/discussion/6106986/regular-savings-accounts-the-best-currently-available-list/p1

secretbeetroot

Thanks everyone!

Okay so a hypothetical new plan...

• Transfer my H2B to a LISA but leave the balance as-is until I have a house buying plan, then at least I'm not tying up too much money
• Put the £1000 into the Virgin Money acc (as I would get 2.02% on up to £1000)
• Put everything else into the Tesco acc as before and keep £500 in my Santander student current acc

My one concern is with the Virgin Money, as of course they'll do a credit check. I have no credit history at all, I can't even get a score. I don't know whether to apply and see what happens or to leave it for now and stick with just the tesco acc until I have some kind of credit score. (None of the other current accounts have better interest than the Tesco saver apart from the Nationwide one, but that needs min £1000/month.) I was planning on reviewing my spending after my first term and seeing if I was in a good position to get a credit building credit card, just use it for groceries and pay off in full each month.

Does this sound feasible/better? Any advice about the credit issue would be great too!

grumiofoundation

As a student you could open a student account, many come with good rewards.
E.g. HSBC currently offering £80 + £20 Uber eats voucher.
or Santander offering 4 year railcard.
https://www.moneysavingexpert.com/students/student-bank-account/

secretbeetroot

grumiofoundation said:

As a student you could open a student account, many come with good rewards.

I've already got a Santander student acc but of course it pays no interest

Alexland

secretbeetroot said:

Transfer my H2B to a LISA but leave the balance as-is until I have a house buying plan, then at least I'm not tying up too much money

I don't see why you would put anything more than a token minimum amount in the LISA to get the account opened. From what you describe you are hardly going to be in a position to use the full £4k LISA annual contribution allowance anytime soon so why not wait without locking the money into an account with an early withdrawal penalty to see how things pan out in the next few years?

Also don't let your lack of credit history stop you applying for accounts that are suitable for your needs as you never really know what type of customers a bank is looking to attract and there are certain advantages to them of building a relationship with younger customers who might go onto take out more products as their financial needs develop.