What to do with daughters money?

chubsta

I have an idea what to do after absolutely minimal research but just putting it out there for advice on the best way to go.

Daughter - 20, working full time, just above minimum wage but potential in the future for increases as she gets trained up. Lives at home, no debt at all, currently saves a few bits and pieces but nothing much.
Daughter has just been given £28500 by grandparents for future house deposit.

My idea:
As the money is for a house deposit and will 100% not be used for anything else my limited research shows a LISA may be the way to go so would the following be a good idea...?

Year one - £4000 to the LISA (I believe the Gov will add 25% to this as long as the money is used for a house purchase - anyone confirm?), £16000 to an ordinary ISA, £8000 in the best one year savings account we can find.
Year 2 - another £4000 to the LISA (from the savings account), put the £16000 from the ordinary ISA into another one, leaving £4000 for a Savings account.
Year 3 - yet another $4000 to the LISA (from the Savings account), once again put the £16,000 into a normal ISA, no money left for a savings account.
Year 4 - another £4000 to the LISA, this time money comes from the 'normal' ISA, then put the remaining £12000 in an ISA.

etc etc etc until finally a time when 2-bedroom terraced houses don't cost £350,000 and she can afford to move out!

Obviously she should be able to at some point start contributing to the LISA/ISA from her wages but thought I would keep it simple.

So, does this seem like a good idea? I only started looking at it yesterday afternoon and have zero knowledge on ISAs etc so rather than go too far in thought I would put it out there for helpful comments!

Flugelhorn

what does your daughter want to do with the money?

chubsta

Flugelhorn said:

what does your daughter want to do with the money?

we talked about it yesterday and she just wants it to make as much as possible over the next few years so she can use it as a house deposit, she is happy with what we have worked out but we would like some idea as to whether that is actually the best way to go.

Sarahspangles

chubsta said:

I have an idea what to do after absolutely minimal research but just putting it out there for advice on the best way to go.

Daughter - 20, working full time, just above minimum wage but potential in the future for increases as she gets trained up. Lives at home, no debt at all, currently saves a few bits and pieces but nothing much.
Daughter has just been given £28500 by grandparents for future house deposit.

My idea:
As the money is for a house deposit and will 100% not be used for anything else my limited research shows a LISA may be the way to go so would the following be a good idea...?

Year one - £4000 to the LISA (I believe the Gov will add 25% to this as long as the money is used for a house purchase - anyone confirm?), £16000 to an ordinary ISA, £8000 in the best one year savings account we can find.
Year 2 - another £4000 to the LISA (from the savings account), put the £16000 from the ordinary ISA into another one, leaving £4000 for a Savings account.
Year 3 - yet another $4000 to the LISA (from the Savings account), once again put the £16,000 into a normal ISA, no money left for a savings account.
Year 4 - another £4000 to the LISA, this time money comes from the 'normal' ISA, then put the remaining £12000 in an ISA.

etc etc etc until finally a time when 2-bedroom terraced houses don't cost £350,000 and she can afford to move out!

Obviously she should be able to at some point start contributing to the LISA/ISA from her wages but thought I would keep it simple.

So, does this seem like a good idea? I only started looking at it yesterday afternoon and have zero knowledge on ISAs etc so rather than go too far in thought I would put it out there for helpful comments!

It’s not really ‘Year 1’, rather it’s by tax year?

If she really wants to maximise the amount that accumulates, using the non-ISA savings to feed regular saving accounts would earn slightly more interest. Or use one or more of the Single Access or Rainy Day accounts that gives a better rate up until you need to withdraw. Having accounts with building societies like Nationwide, Yorkshire or Skipton often triggers bonuses or loyalty offers with better interest (e.g. Nationwide may run their Fairer Shares £100 again for people with a Flex account plus one savings acccount)

If she has anything like a phone on contract, she may save by buying her next handset up front.

flipper_72

chubsta said:

I have an idea what to do after absolutely minimal research but just putting it out there for advice on the best way to go.

Daughter - 20, working full time, just above minimum wage but potential in the future for increases as she gets trained up. Lives at home, no debt at all, currently saves a few bits and pieces but nothing much.
Daughter has just been given £28500 by grandparents for future house deposit.

My idea:
As the money is for a house deposit and will 100% not be used for anything else my limited research shows a LISA may be the way to go so would the following be a good idea...?

Year one - £4000 to the LISA (I believe the Gov will add 25% to this as long as the money is used for a house purchase - anyone confirm?), £16000 to an ordinary ISA, £8000 in the best one year savings account we can find.
Year 2 - another £4000 to the LISA (from the savings account), put the £16000 from the ordinary ISA into another one, leaving £4000 for a Savings account.
Year 3 - yet another $4000 to the LISA (from the Savings account), once again put the £16,000 into a normal ISA, no money left for a savings account.
Year 4 - another £4000 to the LISA, this time money comes from the 'normal' ISA, then put the remaining £12000 in an ISA.

etc etc etc until finally a time when 2-bedroom terraced houses don't cost £350,000 and she can afford to move out!

Obviously she should be able to at some point start contributing to the LISA/ISA from her wages but thought I would keep it simple.

So, does this seem like a good idea? I only started looking at it yesterday afternoon and have zero knowledge on ISAs etc so rather than go too far in thought I would put it out there for helpful comments!

In year 2 the £8000 plus interest from the 1 year account can be split £4k into LISA and balance to ISA. There is no need to take the £16 already in the ISA out, this can be transferred to one with a better interest rate if needed but it isn’t new money so doesn’t count towards the limit.

then year 3 onwards just transfer £4k per year into LISA.

chubsta

flipper_72 said:

chubsta said:

I have an idea what to do after absolutely minimal research but just putting it out there for advice on the best way to go.

Daughter - 20, working full time, just above minimum wage but potential in the future for increases as she gets trained up. Lives at home, no debt at all, currently saves a few bits and pieces but nothing much.
Daughter has just been given £28500 by grandparents for future house deposit.

My idea:
As the money is for a house deposit and will 100% not be used for anything else my limited research shows a LISA may be the way to go so would the following be a good idea...?

Year one - £4000 to the LISA (I believe the Gov will add 25% to this as long as the money is used for a house purchase - anyone confirm?), £16000 to an ordinary ISA, £8000 in the best one year savings account we can find.
Year 2 - another £4000 to the LISA (from the savings account), put the £16000 from the ordinary ISA into another one, leaving £4000 for a Savings account.
Year 3 - yet another $4000 to the LISA (from the Savings account), once again put the £16,000 into a normal ISA, no money left for a savings account.
Year 4 - another £4000 to the LISA, this time money comes from the 'normal' ISA, then put the remaining £12000 in an ISA.

etc etc etc until finally a time when 2-bedroom terraced houses don't cost £350,000 and she can afford to move out!

Obviously she should be able to at some point start contributing to the LISA/ISA from her wages but thought I would keep it simple.

So, does this seem like a good idea? I only started looking at it yesterday afternoon and have zero knowledge on ISAs etc so rather than go too far in thought I would put it out there for helpful comments!

In year 2 the £8000 plus interest from the 1 year account can be split £4k into LISA and balance to ISA. There is no need to take the £16 already in the ISA out, this can be transferred to one with a better interest rate if needed but it isn’t new money so doesn’t count towards the limit.

then year 3 onwards just transfer £4k per year into LISA.

So, if I understand it, the £20,000 annual ISA limit on contributions doesn't include previous years if it is just 'reinvested'? So after 3 years she could have £12,000 (+effectively £3000 from the Gov.) and each year potentially put £16000 into an ISA so she could have £48,000 in that as a maximum? I presumed you could only ever have a total of £20,000 in ISAs but as I said, I am only 24hrs into looking at this!

chubsta

Sarahspangles said:

chubsta said:

I have an idea what to do after absolutely minimal research but just putting it out there for advice on the best way to go.

Daughter - 20, working full time, just above minimum wage but potential in the future for increases as she gets trained up. Lives at home, no debt at all, currently saves a few bits and pieces but nothing much.
Daughter has just been given £28500 by grandparents for future house deposit.

My idea:
As the money is for a house deposit and will 100% not be used for anything else my limited research shows a LISA may be the way to go so would the following be a good idea...?

Year one - £4000 to the LISA (I believe the Gov will add 25% to this as long as the money is used for a house purchase - anyone confirm?), £16000 to an ordinary ISA, £8000 in the best one year savings account we can find.
Year 2 - another £4000 to the LISA (from the savings account), put the £16000 from the ordinary ISA into another one, leaving £4000 for a Savings account.
Year 3 - yet another $4000 to the LISA (from the Savings account), once again put the £16,000 into a normal ISA, no money left for a savings account.
Year 4 - another £4000 to the LISA, this time money comes from the 'normal' ISA, then put the remaining £12000 in an ISA.

etc etc etc until finally a time when 2-bedroom terraced houses don't cost £350,000 and she can afford to move out!

Obviously she should be able to at some point start contributing to the LISA/ISA from her wages but thought I would keep it simple.

So, does this seem like a good idea? I only started looking at it yesterday afternoon and have zero knowledge on ISAs etc so rather than go too far in thought I would put it out there for helpful comments!

It’s not really ‘Year 1’, rather it’s by tax year?

If she really wants to maximise the amount that accumulates, using the non-ISA savings to feed regular saving accounts would earn slightly more interest. Or use one or more of the Single Access or Rainy Day accounts that gives a better rate up until you need to withdraw. Having accounts with building societies like Nationwide, Yorkshire or Skipton often triggers bonuses or loyalty offers with better interest (e.g. Nationwide may run their Fairer Shares £100 again for people with a Flex account plus one savings acccount)

If she has anything like a phone on contract, she may save by buying her next handset up front.

Tax-year stuff is not something I have taken into account - what are the implications of doing it now rather than in April, or can you even do it - open a LISA etc - half way through the year?
 
So you think a high-rate savings account would be better? Could you explain a little more if possible please...

Regarding stuff like the phone, she doesn't have a contract as she is on a monthly cheap sim, she has a car etc but no loan for it, no debt at all as we have always stressed the importance of saving for what you want rather then getting a loan and paying it off, something which she is totally on board with - she's not 'great with money' but she's still young and is starting out strongly. 

Sarahspangles

chubsta said:

flipper_72 said:

In year 2 the £8000 plus interest from the 1 year account can be split £4k into LISA and balance to ISA. There is no need to take the £16 already in the ISA out, this can be transferred to one with a better interest rate if needed but it isn’t new money so doesn’t count towards the limit.

then year 3 onwards just transfer £4k per year into LISA.

So, if I understand it, the £20,000 annual ISA limit on contributions doesn't include previous years if it is just 'reinvested'? So after 3 years she could have £12,000 (+effectively £3000 from the Gov.) and each year potentially put £16000 into an ISA so she could have £48,000 in that as a maximum? I presumed you could only ever have a total of £20,000 in ISAs but as I said, I am only 24hrs into looking at this!

Yes, every April 6th the ISA limit resets so you get another £20k.

The £20k plus interest from the previous year can be left where it is or moved for a better interest rate. Be careful though - the process of transferring it needs to be ISA to ISA so its tax free status is unchanged. 

elsien

While appreciating that you want to help her out, would it not be better for her to be doing the research and getting more understanding of the options?

chubsta

elsien said:

While appreciating that you want to help her out, would it not be better for her to be doing the research and getting more understanding of the options?

Lets assume that there has been full discussion and this is what she thinks is a good idea...

Albermarle

chubsta said:

flipper_72 said:

chubsta said:

I have an idea what to do after absolutely minimal research but just putting it out there for advice on the best way to go.

Daughter - 20, working full time, just above minimum wage but potential in the future for increases as she gets trained up. Lives at home, no debt at all, currently saves a few bits and pieces but nothing much.
Daughter has just been given £28500 by grandparents for future house deposit.

My idea:
As the money is for a house deposit and will 100% not be used for anything else my limited research shows a LISA may be the way to go so would the following be a good idea...?

Year one - £4000 to the LISA (I believe the Gov will add 25% to this as long as the money is used for a house purchase - anyone confirm?), £16000 to an ordinary ISA, £8000 in the best one year savings account we can find.
Year 2 - another £4000 to the LISA (from the savings account), put the £16000 from the ordinary ISA into another one, leaving £4000 for a Savings account.
Year 3 - yet another $4000 to the LISA (from the Savings account), once again put the £16,000 into a normal ISA, no money left for a savings account.
Year 4 - another £4000 to the LISA, this time money comes from the 'normal' ISA, then put the remaining £12000 in an ISA.

etc etc etc until finally a time when 2-bedroom terraced houses don't cost £350,000 and she can afford to move out!

Obviously she should be able to at some point start contributing to the LISA/ISA from her wages but thought I would keep it simple.

So, does this seem like a good idea? I only started looking at it yesterday afternoon and have zero knowledge on ISAs etc so rather than go too far in thought I would put it out there for helpful comments!

In year 2 the £8000 plus interest from the 1 year account can be split £4k into LISA and balance to ISA. There is no need to take the £16 already in the ISA out, this can be transferred to one with a better interest rate if needed but it isn’t new money so doesn’t count towards the limit.

then year 3 onwards just transfer £4k per year into LISA.

So, if I understand it, the £20,000 annual ISA limit on contributions doesn't include previous years if it is just 'reinvested'? So after 3 years she could have £12,000 (+effectively £3000 from the Gov.) and each year potentially put £16000 into an ISA so she could have £48,000 in that as a maximum? I presumed you could only ever have a total of £20,000 in ISAs but as I said, I am only 24hrs into looking at this!

It is possible to build up ISA's to be worth hundreds of thousands of Pounds, as the £20K is only the annual limit for adding new money.
There is a sub forum for ISA's. If you spend some time scrolling through that and reading some of the threads, you should be better informed about ISA rules. ISAs & tax-free savings — MoneySavingExpert Forum

Has your daughter joined her workplace pension scheme?