Teenager and savings

CC21x

Hi, 

Looking for some advice pease.  I am keen for my 19 year old son to start saving just a small amount every month, to get into good habits early on.  

Just wondering what’s best to advise him to do, I was thinking an isa of some form rather than savings, as the idea would be to put it away and not to go into it.  Can  anyone suggest what type of isa would be best and where/who to go with? It wouldn’t be to put a lump sum into, but rather just to let it build up over the years.  

Thanks in advance. 

Brie

Regular savings account?  The sort where you put £25 in every month.  Great way to get into a good habit, see the amount grown, learn about how interest accumulates.

CC21x

Yes I agree, they are great, although I feel with a regular savings account is easier just to dip into it if he felt he wanted to, whether or not there be a penalty for it.  I thought the Isa as it had more of a feeling of being in it for the long term if that makes sense. He does already have a savings account. 

xylophone

What happened to his CTF?

Had he thought of a LISA?

eskbanker

Worth him considering a Lifetime ISA, assuming he'll be looking to get onto the housing ladder at some point - the government will add a 25% bonus for that purpose and there's a withdrawal penalty for premature access, which should act as a disincentive:

https://www.moneysavingexpert.com/savings/lifetime-isas/

Failing that, a notice account:

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#notice

refluxer

Are you thinking of a Cash ISA or a Stocks and Shares ISA ? A Stocks and Shares ISA is undoubtedly aimed at people with long term goals, but withdrawing will most-likely still be possible. If it's a Cash ISA you're considering then the main reason for opening one of those is because you'd otherwise pay tax on your savings interest. Money isn't any more restricted in a cash ISA than it would be in the equivalent non-ISA account. In fact, in some cases it's actually less restrictive (eg. being able to withdraw from a fixed rate ISA by paying a penalty compared with not being able to withdraw from a non-ISA fixed rate account at all)

You son can earn up to £18,570 a year in combined income and savings interest, so if he earns nowhere near that, then his money would be better off in a non-ISA account anyway because they generally pay better rates of interest than their ISA equivalents and the interest would be tax free.

As mentioned above, if you want the highest interest rate for his savings then a Regular Saver would be the best place to put modest amounts away each month and there are lots of options in the 5.25% to 8% range, although the highest of those often require a current account with the same bank or building society. Not all Regular Savers allow access to the money so if this was important, you'd have to find one that doesn't.

Alternative accounts with restricted access would be an easy access account that limits the number of withdrawals per year or a 'notice' account.

Altior

There's no reason not to do a combination, which would be good practice. A LISA for the medium to long term, and an emergency type fund that can be accessed easily. The 8% Nationwide Flex Regular Saver as an example. 

CC21x

Thank you all for your comments, I hadn’t actually thought of a notice account, so I’ll look into that to see what’s around.  He hasn’t actually thought much about it at all, it’s me trying to make suggestions that would be beneficial for him.  

I had though a stocks and shares one for the longer term.  I’m aware of the nationwide saver at 8% which seems great, he currently has an account with one bank he uses for everyday and another with a different bank for savings. Would there be any harm in him opening another account with nationwide/another bank? I’m just thinking as he is young and not much in the way of a credit history/ score etc, would it look bad? 

Kim_13

The occasional Regular Saver doesn’t allow withdrawals until maturity - Tipton and Coseley Building Society and Beehive Money (part of Nottingham Building Society) are known for this. Both are likely due a new issue soon and have been fixed rate, meaning filling them will become more attractive if rates drop. The current Tipton issue was withdrawn for app applications, but both would likely offer that for a new issue. Postal has been available for those that prefer it.

Opening new accounts won’t do him any harm at this stage, especially if they are only savings accounts which don’t involve a hard credit search. Given lack of history he may be more likely to be asked to produce ID documents, so it may be worth checking the requirements first. App based accounts may be easier, as they are likely to take just a passport or driving licence (full or provisional) removing the need to obtain certified copies where he cannot visit a branch with originals. If he’d like a new current account with a high street bank (perhaps an account he is interested in requires it) the hard credit search would likely fall off his record before he wanted to make any important applications (1-2 years depending on the Credit Reference Agency used), so you could say that now is a good time to open new accounts. 

Starling/Chase/Monzo offer current accounts with a soft credit check only, if he’d like a current account but not the hard search that usually comes with them.

CC21x

Hi Kim_13, thank you for the information. He currently has a starling account for general use.  

I looked up Tipton and Coseley Building  society there, it wasn’t one I’d ever heard of but is a good way to keep any savings in there until the term ends.  From what I can see they have a fixed rate saver at 5.75% until Dec 24, or the option for longer ones until 2025/26.  By a new issue do you mean a new fixed rate for the savings? Would it be best to wait if there are new ones perhaps being released? 

Other than opening up another current account to get the linked savings account, for example the Nationwide at 8%, I think something like the above you mentioned seems a good option.  Opening a Lisa and having both as Altior  suggested would be a good combination, even if just small amounts in each per month. 

Kim_13

CY24 said:

Hi Kim_13, thank you for the information. He currently has a starling account for general use.  

I looked up Tipton and Coseley Building  society there, it wasn’t one I’d ever heard of but is a good way to keep any savings in there until the term ends.  From what I can see they have a fixed rate saver at 5.75% until Dec 24, or the option for longer ones until 2025/26.  By a new issue do you mean a new fixed rate for the savings? Would it be best to wait if there are new ones perhaps being released? 

Other than opening up another current account to get the linked savings account, for example the Nationwide at 8%, I think something like the above you mentioned seems a good option.  Opening a Lisa and having both as Altior  suggested would be a good combination, even if just small amounts in each per month. 

I mean the Regular Savings products - other fixes are fixes for a lump sum, so won’t be useful to your son until later in the savings journey. The current version appears here, but is now branch only: https://www.thetipton.co.uk/our-savings/current-savings-rates-1/regular-savings/

I believe there will be a new issue soon - there is usually 13/14 months until maturity from launch, but as you can see that one would mature a year tomorrow. I opened the app version of the above in September, and looking at their closed issue savings rates page, there is a Regular Saver listed that matures on 31.07.2024 - suggesting a new issue every few months. 

I have the Nationwide 8% account also - one thing to note is that the rate drops to 2.15% if 4 withdrawals are made during the term - in which case his Starling account and any linked savings spaces he might have would pay more from the date of the 4th withdrawal.

Another idea would be an account which requires a passbook to be posted to request a withdrawal, as this can also act as a disincentive to impulse spend. Something like the Hinckley and Rugby Building Society 30 Day Notice Regular Saver currently paying 5.25%, or the Stafford Railway Building Society at 5.15%. The latter doesn’t require any notice, but is limited to 4 withdrawals a year and doesn’t have a fixed term.

I’d also keep an eye out for any Christmas Regular Savers which may soon launch - these often have very limited withdrawal options until we get close to the following Christmas.