Sorting savings for son turning 18

Mistermeaner

After general advice thoughts and musings on setting up savings for my son who turns 18 this week.

He is currently doing a levels and will likely go uni. Our intention is to fund his uni through him getting the standard loans and us supporting with day-to-day expenses so none of his savings are intended for uni

At the moment he has a tesco junior cash isa with 10K in it and a junior SIPP with hargreaves lansdown with 7K in it.

My intention unless there is any suggestions to the contrary is to:

- Leave the pension alone (not much can do with this anyway!)

- Transfer the tesco junior isa to HL and split it 50/50 cash ISA and S&S ISA - 5K into each (HL cash isa is excellent as it gives broad market access). The S&S ISA will be invested in simple global tracker like vanguard

- I'll also open a HL LISA for him, just stick 500quid in it for now

Any future payments into his account I would look to put into the LISA to fund his first house purchase

My intention is to sit down with him and take him through all his investments, epxlain ecah type of account and show him the tax benefits and historic growth from investments and hopefully instill in him the benefits of saving and investing from a young age!

Thanks

El_Torro

Hard to comment without knowing when he will need the money (not for the next 3 years at least, from what you say) but it sounds sensible enough. 

I think focussing on growing money in LISAs is a good strategy, though no doubt he'll have other expenses before buying a property. Buying a car, deposit for a rental property, etc... How much of that comes from his savings and how much comes from you is up to you. 

Now that he's 18 he has full control of his own finances so it's great that you suggest what he does, ultimately it's down to him though.

400ixl

The split going into the LISA which will have the most growth (25% + Interest (or stock increases)) is the lowest you are allocating by far.

If his intensions are to buy a house (within the maximum limits of a LISA) in the future, then it may be work putting more into this. Does of course need to map to his life goals.

Personally I would put £4k into the LISA for this year.

As for a cash ISA, unless he is going to make more interest that a savings account then I don't necessarily see the point as he is not going to pay interest on the savings and can likely get a better deal elsewhere. Maybe a fixed savings account for a couple of years alongside regular savers if he is not going to be needing the money for a year or two.

Putting some in a longer term S&S ISA would make sense unless it would be used for a house anyway, in which case the LISA may be a better investment next year (if this years allowance does get used).

Albermarle

My intention is to sit down with him and take him through all his investments, epxlain ecah type of account and show him the tax benefits and historic growth from investments and hopefully instill in him the benefits of saving and investing from a young age!

That is a good idea but do not be too surprised if when he goes to Uni/gets a bit older, that he forgets some of your lessons.....

Charlie-Otter

Mistermeaner said:

After general advice thoughts and musings on setting up savings for my son who turns 18 this week.

Don't want to hijack your post, but we are in a similar position with our son turning 18yr this Oct, so wondered what you had decided upon in the end, and if you had any tips, or obstacles you came across with the various ISA rules?

Our son also has a couple of accounts with HL, so we were thinking of sticking with them for ease...although have had some issues with them previously (they are great for the basics, but the moment it is anything out of the ordinary, their communication and paperwork all falls down!). He has a Junior ISA (£4k) and a Bare Trust Account (£20k) with HL, and a Cash ISA (£9k) elsewhere. I believe the HL JISA will automatically update to a S&S ISA when he turns 18yr; and the HL Bare Trust will become a Fund & Share Account, so we will probably use this to put £4k into a LISA, but are trying to work out what to do with the remaining £16k as he is likely to need this for Uni in Autumn 2026.

He wants to maximise his LISA by putting the £4k limit into this each tax year (free Gov money, yes please!), and understands that he absolutely can not touch this money until buying a property in 8/10yr time. He plans on starting Uni Autumn 2026, so will need the remaining £10/12k (after topping up his LISA) accessible to live off, but probably not until 2nd/3rd year, so we were thinking to put this in another Cash ISA, so a better return, but still accessible, albeit not immediately/regularly. His £4k JISA/S&S ISA he will probably just leave for emergencies - the investments haven't been in long, but have grown by 6%'ish currently, so will hopefully increase further by the time he might need this money in his 3rd year of Uni, so could always be cashed in if needed.

Do you/anyone have any words of wisdom for us, before we go through all the options with our son, and help him work out what he needs when/where? We understand that he is in a very fortunate position that we have squirreled away money each month since he was born; but he has also saved 50% of all his birthday/Xmas money, and some of his wages now he has a job, so he is relatively sensible with money...but unrestricted access to £33k is quite a temptation for an 18yr old! The £20k Bare Trust was an inheritance in 2024, so we want to get him thinking about how to make this money work best for him, so he can stretch it out for the best return...as the relative who left it to him would definitely have wanted. I also do understand entirely that once he turns 18yr, advice and guidance is all we can offer, and if he wants to blow it all on a holiday in the sun...c'est la vie!

eskbanker

Charlie-Otter said:
His £4k JISA/S&S ISA he will probably just leave for emergencies - the investments haven't been in long, but have grown by 6%'ish currently, so will hopefully increase further by the time he might need this money in his 3rd year of Uni, so could always be cashed in if needed.

Best not to regard investments as an emergency fund - unless invested in very low risk products, the inherent volatility means that capital value could be significantly lower when needed, especially if this is just in a few years time.

Charlie-Otter

eskbanker said:

Charlie-Otter said:
His £4k JISA/S&S ISA he will probably just leave for emergencies - the investments haven't been in long, but have grown by 6%'ish currently, so will hopefully increase further by the time he might need this money in his 3rd year of Uni, so could always be cashed in if needed.

Best not to regard investments as an emergency fund - unless invested in very low risk products, the inherent volatility means that capital value could be significantly lower when needed, especially if this is just in a few years time.

The £4k S&S ISA is in x2 low-risk managed funds - at one stage it had lost 0.5% of original value, but is currently up around 6% from what was put in. In an ideal world he will leave this alone but, if it was still up overall, would be an option to cash-in without losing anything (trading fees are minimal) if he really needed it (perhaps by his 3rd year of Uni), but yes, we would certainly advise him against cashing these in at a loss.