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

eskbanker

steampowered said:

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.

While it's valid to observe that the £450K limit hasn't been revised since product launch, OP's eldest already has a LISA and there is no mention of London (or any other geographic location), so best to ascertain facts before making recommendations....

Albermarle

eskbanker said:

steampowered said:

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.

While it's valid to observe that the £450K limit hasn't been revised since product launch, OP's eldest already has a LISA and there is no mention of London (or any other geographic location), so best to ascertain facts before making recommendations....

Also only a minority of students on a minority of courses will go straight into a high earning job in London.
The average graduate starting salary is around £23K and that does not take account of the ones who never end up in a graduate job at all. 

steampowered

eskbanker said:

While it's valid to observe that the £450K limit hasn't been revised since product launch, OP's eldest already has a LISA and there is no mention of London (or any other geographic location), so best to ascertain facts before making recommendations....

Equally, it makes no sense for people to be recommending Lifetime ISAs without knowing the Op's circumstances.

I agree with recommending a Lifetime ISA if the children are fairly sure that they want to be working in moderately paid jobs.

If the children might want to move to London to advance their careers, or might want to end up in very well paid jobs (e.g. software engineering) in future, then a Lifetime ISA might not be appropriate. 

Of course none of us know the Op's circumstances. Equally, especially for the 16 year old, the child may not know themselves what route they want to go down.

steampowered

Albermarle said:

Also only a minority of students on a minority of courses will go straight into a high earning job in London.
The average graduate starting salary is around £23K and that does not take account of the ones who never end up in a graduate job at all. 

You don't normally buy a property on a graduate salary. The whole point of graduate jobs is that your salary is expected to increase rapidly after a year or two in the role.

Remember that the average age of a first time buyer in the UK is 30.

Also remember that the Lifetime ISA hasn't been increased with inflation at all, ever. 

The government has a history of not increasing the allowances on these products - simply moving on to the next product for the PR. The old "Help to Buy ISA" has a limit of £250k outside London. 

House prices have increased on average 4.3% per year since 2011. If you calculate the maths on an assumption that house prices continue increasing at that rate for the next 10 years, and on the assumption that there will be no further increases to the Lifetime ISA limit, then the Lifetime ISA could only be used without penalty to buy a house which is worth £300k today.

You don't need to be a particularly high earner to buy a property worth £300k. 

Cheese1990

I beg to differ on the high earner comment to buy a 300k property as presuming a 10/15% deposit them they would need a salary of 54ishK to buy it obviously different if they are buying with a partner but I certainly wouldn't class 54k as a moderate salary

steampowered

Cheese1990 said:

I beg to differ on the high earner comment to buy a 300k property as presuming a 10/15% deposit them they would need a salary of 54ishK to buy it obviously different if they are buying with a partner but I certainly wouldn't class 54k as a moderate salary

To me, this comment shows the difference between London and the rest of the country. I don't see £54k as a particularly high salary in London. I was on £66k as a newly qualified solicitor in London back in 2011. It's a lot higher now (at least in the corporate/commercial type places). 

Also worth pointing out that a lot of people buy with a partner. Two people earning £35k ish could cover a mortgage on a £300k property.

Genevieve29

Thanks everyone, especially for the LISA debate. We're not in London, though of course that could change for the children so it's something to consider.

I also have a very high earning 17 year old who could end up working in London so it's useful from his perspective too (though I've outsourced his financial advice - not my area of expertise!).