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Where to invest Child Trust Fund after withdrawing ?

sky_rat
sky_rat Posts: 229 Forumite
Part of the Furniture 100 Posts Combo Breaker
edited 16 April 2024 pm30 7:25PM in Savings & investments
My daughter is 18 and has withdrawn her child trust fund of £10k.  She has put it into an HSBC Online Bonus Saver account for now so she can get access to it, but she wants to invest it for the future.

I have no experience with savings accounts, so I am seeking guidance on where she can invest her money.

I thought she would need something like an ISA.  However, the ISA guide on the MSE website states...

Now rates have risen, basic rate taxpayers only need around £20,000 in normal savings to pay tax on it, and higher-rate around £10,000. If you don't have this much, then as cash ISAs usually pay less interest than normal savings, you should opt for a standard savings account

So as she only has £10k to invest, would she be better off with a normal savings account rather than an ISA ?

She is currently in college full time and does ocassional work in retail, therefore she does not earn enough to pay tax.




Comments

  • eskbanker
    eskbanker Posts: 35,345 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    sky_rat said:
    My daughter is 18 and has withdrawn her child trust fund of £10k.  She has put it into an HSBC savings account for now so she can get access to it, but she wants to invest it for the future.
    Has she formulated any view about how far into the future, and what she'd anticipate using it for?  If she expects to want to get onto the housing ladder at some point then opening a Lifetime ISA with £4K (converted to £5K by the government) would seem a good start:

    https://www.moneysavingexpert.com/savings/lifetime-isas/
  • slinger2
    slinger2 Posts: 578 Forumite
    500 Posts Name Dropper
    With £10k to save she'll get roughly £500/year interest. The allowance for 20% taxpayers is £1,000 and given that she's a non-taxpayers there's no tax advantage in having a Cash ISA (at least in the short term).

    I suppose a Lifetime ISA would be an option if she's thinking more long term (buying a first home) but the money's tied up and can normally only be used for a house purchase.
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