Where to save/invest £15k for 16 year old and £25k for 21 year old?

Genevieve29

My 16 year old has £15k to save or invest and my 21 year old has £25k. They've asked me for some help and I've been Googling fixed rate accounts, bonds, ISAs - where would you put it in terms of the mix of products? I've noticed that the best (relatively!) rates for fixed interest savings accounts are only for over 18's.

just turned 16 year old:
- will want to buy a car in 1 year
- hopes to go to university in 2024
- locking the money away so it can't be spent would be a positive!
- has a S&S JISA with no deposits made this tax year
- no other savings or investments

21 year old:
- two years of university to go and expects to need £5k per year
- may want to buy a car once graduated and might need some money to set themselves up with somewhere to live (rental deposit etc.) if not returning to thr family home
- has a LISA with £500 headroom to make an additional payment this tax year
- no other savings or investments

Albermarle

Investing it is probably not a good idea due to the relatively short time frames until they will need access to the money .
Investing is really a medium /long term project .
However the 16 year old could maybe invest some  in their S&S JISA, which could be left untouched for a few years.
The 21 year old should top up their LISA due to the 25% bonus and maybe the full £4K in it next tax year . Still leaves £20K for the other things .

Otherwise it will probably have to  be a mixture of easy access savings accounts /premium bonds + some in fixed rate savers for a year or two .

tebbins

Genevieve29 said:

My 16 year old has £15k to save or invest and my 21 year old has £25k. They've asked me for some help and I've been Googling fixed rate accounts, bonds, ISAs - where would you put it in terms of the mix of products? I've noticed that the best (relatively!) rates for fixed interest savings accounts are only for over 18's.

just turned 16 year old:
- will want to buy a car in 1 year
- hopes to go to university in 2024
- locking the money away so it can't be spent would be a positive!
- has a S&S JISA with no deposits made this tax year
- no other savings or investments

21 year old:
- two years of university to go and expects to need £5k per year
- may want to buy a car once graduated and might need some money to set themselves up with somewhere to live (rental deposit etc.) if not returning to thr family home
- has a LISA with £500 headroom to make an additional payment this tax year
- no other savings or investments

1. Having savings has no bearing on university. Unless they expect to be a very high earner, taking out tuition fee and maintenance "loans" is almost certainly better than paying for university upfront. What savings can help with are if they want to do extra stuff while there/at that age like travelling etc. It's not unusual, especially through the pandemic for money-literate students to come out of university with more money than they started that time with.

2. For both of them, locking money away in a (cash) LISA:
- locks the money away until they buy a house*
- gives them a 25% top up from the government*

So meets your "locking away" criteria however the 16 year old has to wait until 18 to open one.

*You should research the Lifetime ISA guide on the site very carefully and make sure you and they fully understand how they work.

3. Due to the short timeframes you are suggesting, I think investing savings may be inappropriate for them at this stage. Only invest what you are sure you won't need for at least 5 years, ideally at least 10. However there are plenty of younger people (I'm not sure if I still qualify) who started saving into S&S ISAs from a younger age, wh may be able to retire much earlier than 55-58 thanks to those decisions.

Albermarle

. Having savings has no bearing on university. Unless they expect to be a very high earner, taking out tuition fee and maintenance "loans" is almost certainly better than paying for university upfront. What savings can help with are if they want to do extra stuff while there/at that age like travelling etc. It's not unusual, especially through the pandemic for money-literate students to come out of university with more money than they started that time with.

Even if the student takes out max loans ( which as you say is advisable to do ) the maintenance loans are not enough to live off.
So nearly all students have to use some of their own savings / get a part time job/ get extra funds from bank of Mum and Dad, just to help pay the rent and other bills and have a bit of fun . 

tebbins

Albermarle said:

. Having savings has no bearing on university. Unless they expect to be a very high earner, taking out tuition fee and maintenance "loans" is almost certainly better than paying for university upfront. What savings can help with are if they want to do extra stuff while there/at that age like travelling etc. It's not unusual, especially through the pandemic for money-literate students to come out of university with more money than they started that time with.

Even if the student takes out max loans ( which as you say is advisable to do ) the maintenance loans are not enough to live off.
So nearly all students have to use some of their own savings / get a part time job/ get extra funds from bank of Mum and Dad, just to help pay the rent and other bills and have a bit of fun . 

^ Standing corrected ^
£5k extra a year seems a lot though. Has the 16 year old considered:

a. Doing a degree-apprenticeship? Honestly university these days is just a 3-4 year holiday camp unless you're doing a serious academic or career degree, IMHO don't bother unless you genuinely want the university experience and understand that degrees don't mean anything these days, or you got into Oxbridge or are doing medicine/law (although we already have too many lawyers which is why there are so many debt collection agencies and parking companies these days, they need something to do)/dentistry/veterinary science. In most graduate employers that also offer school leaver programmes/apprenticeships, there is little to no difference between apprentices/graduates in terms of training/status/prospects. University isn't a career enhancer anymore, for many it's just an option to defer the onset of adult life by 3-4 years. Civil service graduate schemes are open to all internal civil servants of any grade who have passed probation, I know people who joined an entry-level admin job for 6-12 months, passed probation then got on a grad scheme and get paid a decent full-time salary to train, and a degree and £50k+ job at the end of it.

b. Doing university from home, saving on the rent?
c. Just getting a job to get some life experience of what they don't want to do first for a bit, then uni as a deferred student or applying in a later year.
d. The armed forces can also be a great option, it's a lifestyle job that you can only really commit to full-time when you're that age. Depending on the branch you get to travel, make mates for life, some room & board/discounted rent & food may be available, and loads of perks and opportunities that civilian employers can't compete with.

As usual I've taken the thread on a tangent...

Genevieve29

£5k isn't extra, it's what they're living on for the academic year as the maintenance loan only covers the cost of accommodation.

a. Unless they change their mind, it's a degree in a health care sector profession that is required to be able to practice. Degree apprenticeships are like hens teeth - I've been looking into them for the past 4 or 5 years, for my eldest and again now for my youngest. Those that are available are very competitive and in limited subjects.
b. Local university doesn't provide the degree subject and anyway they are very independent and want to go away to study. 
c. See a.
d. See a.

Eldest did c. has benefitted greatly not least by having some savings behind them. And as they worked for 3 years was deemed as independent so qualified for the full loan amount. 

Maybe I should have just described the time frames and amounts and not the circumstances!

tebbins

Genevieve29 said:

£5k isn't extra, it's what they're living on for the academic year as the maintenance loan only covers the cost of accommodation.

a. Unless they change their mind, it's a degree in a health care sector profession that is required to be able to practice. Degree apprenticeships are like hens teeth - I've been looking into them for the past 4 or 5 years, for my eldest and again now for my youngest. Those that are available are very competitive and in limited subjects.
b. Local university doesn't provide the degree subject and anyway they are very independent and want to go away to study. 
c. See a.
d. See a.

Eldest did c. has benefitted greatly not least by having some savings behind them. And as they worked for 3 years was deemed as independent so qualified for the full loan amount. 

Maybe I should have just described the time frames and amounts and not the circumstances!

Yep sorry I've gone and stuck my nose in and derailed the thread.
You're doing very well, I was not aware the maintenance loan situation was that bad now, from what you've said these all seem like solid plans, as in my earlier post my opinion is investing may not be appropriate yet, LISAs and cash savings accounts (including premium bonds) ought to be their priority with their money until they have a clearer idea of first home/car purchases, any treats they want to have while they're young (I'm all for frugality but I think there's a Warren Buffett quote about how you can get so stingy you end up saving up sex for old age).
That said, there's no harm in the 21yo opening a S&S ISA and getting their toes wet with beginner investing some of their money. As the younger one already has a S&S JISA it looks like you already have a fair amount of investing acumen.
+1 for @Albemarle's first post

Albermarle

£5k isn't extra, it's what they're living on for the academic year as the maintenance loan only covers the cost of accommodation.

This has been discussed a few times before in different forum threads. The amount of maintenance loan available depends on the parents income. 

The max maintenance loan is  £9.5K outside London, and the minimum is half of that . Outside London a student should be able to just about be OK with the max loan. Otherwise it will need topping up one way or another . 

The norm seems to be for the better off parents whose offspring get only the minimum, is to pay for the accommodation and the student lives off the loan.

As usual the issue is with the 'squeezed middle' where they get say £7K but the parents can not afford much to top it up. 

tebbins

Albermarle said:

£5k isn't extra, it's what they're living on for the academic year as the maintenance loan only covers the cost of accommodation.

This has been discussed a few times before in different forum threads. The amount of maintenance loan available depends on the parents income. 

The max maintenance loan is  £9.5K outside London, and the minimum is half of that . Outside London a student should be able to just about be OK with the max loan. Otherwise it will need topping up one way or another . 

The norm seems to be for the better off parents whose offspring get only the minimum, is to pay for the accommodation and the student lives off the loan.

As usual the issue is with the 'squeezed middle' where they get say £7K but the parents can not afford much to top it up. 

I noticed in the latest student loan statistics they've jiggled it to make it even easier for students from the bottom third or so of households, taken from the middle third and left the top third untouched.
Feels like a certain Two Ronnie & John Cleese sketch 

steampowered

From the perspective of someone who was a high earner pretty much straight after leaving uni, I do not recommend Lifetime ISAs. Remember that the house price limit for getting the bonus out of a Lifetime ISA is £450k.

This cap has not been increased with inflation so could be significantly lower in real terms by the time your children buy a house. If your children end up being high earners, this is not sufficient. A well paid professional job in London can already easily take your first property purchase above £450k.

Personally I would put the money into a stocks & shares ISA:

• Returns are better than keeping money in a savings account where it is going to get eroded by inflation, year after year.
• Your children are young so are able to bear a moderate level of investment risk. 
• It helps give your children knowledge and understanding of investing. This is a crucial life skill - up there with cooking or learning how to drive. Perhaps let them do their own research and choose their own funds? 

xylophone

Your 16 year old has a stocks and shares JISA to which he has not contributed.

He could also open a cash JISA.

He could contribute  part to S&S and part to cash (for the car) and do the same on 6 April.