Financial Plans

acceptablesaver89

Hi, I will be turning 18 soon enough and I want some specific advice over my current plan. I am not an expert and still learning the ropes do any help is appreciated.

So far I will convert my bank account, redeem my child trust fund into it and transfer other savings my parents have managed into it.

Open bank savings account for emergency fund, 1k-2k

Get a credit card (spend and pay back carefully to build up credit score)

Open lifetime isa for my first home

Here's the main thing, I either use the rest of the cash ISA allowance and then use the rest in a stocks ISA or a normal stocks account. Or any other combinations you can think of. That's mainly what I want advice on to max out my allowance. I probably do need some short term easy access savings. And then obviously the long term lifetime ISA.

Anyway I know its a redicilously long post but any advice is very appreciated. Thank you in advance.

Eco_Miser

Your child trust fund could have been converted into a JISA, which would become a normal cash ISA on your 18th birthday, and up to 4K of it then transferred to the LISA, preserving its tax-free status and leaving you with the whole £20k adult ISA allowance to use for the S&S ISA. I'm not sure whether that is still possible in the time before your birthday.

Definitely use your allowance for S&S rather than cash ISA, as you get £1000 savings interest at 0% tax (Personal Savings Allowance) and possibly more if your non-savings, non-dividend, non-ISA income is less than £17570 for the year. See Starting Rate for Savings. Savings interest is generally paid each year and is covered by the annual allowance. Capital Gains Tax on investments is paid only when you sell (outside an ISA) and generally the gain has grown over may years, but you only get one year's allowance to offset the tax.

acceptablesaver89

Thank you very much for your reply @Eco_Miser, so if i redeemed the trust fund normally it wouldn't be tax free?

Stocks and shares isa i will definitely consider as you can earn potentially much more (and lose). I don't know much about investing so I'd probably put it in a fund like the S & P 500 or similar; which is something I will need to consider closer to the time.

Id probably stick with those two accounts for a while + the emergency fund as im definitely not made of money, might just open a easy access saver for some short term saving or whatever eventually.

acceptablesaver89

I forgot to mention this, I know someone might say enjoy your money as well. I definitely will, I'm not gonna be stingey on every payday, I'll just set it aside immediately then spend the rest. My end goal financially is to never have to worry about money if I can (which i know is a lot to ask in today's world)

Albermarle

Anyway I know its a redicilously long post but any advice is very appreciated

The length of your post is about normal on this forum, some are a LOT longer. On the other hand posts that are short usually lack detail, so they do not get answered very well.

Here's the main thing, I either use the rest of the cash ISA allowance and then use the rest in a stocks ISA or a normal stocks account

For cash savings it is sometimes not necessary to use a cash ISA, as you can gain some interest tax free with a normal savings account. How much depends on your current income.

For investing it is better to always do this via a S&S ISA ( or a pension). Otherwise you have to keep records of buying and selling, dividend payments etc. Plus if the investments get bigger you may have to pay tax.

acceptablesaver89

All taken in @Albermarle, thank you.

Middle_of_the_Road

It's great that you're considering your finances at this stage, which will help greatly towards your future goals.

As has been mentioned already, you might not need a cash ISA right now, but Trading 212 currently have the best easy access rate available.

Rather than being limited to the the S&P500, have a read about multi-asset funds. Alternatively, a global a tracker would add diversication if you don't need the bond component of these funds.

https://monevator.com/passive-fund-of-funds-the-rivals/

acceptablesaver89

Ok @Middle_of_the_Road, thank you for your advice.

daveyjp

Stocks ISAs are generally advised for long term investing, at least 5 and preferably 10 years.

At 18 you are going to go through a lot of life changes over the next 5-10 years so consider if you may need the money over a short time period. If so S&S may not be the best option.

acceptablesaver89

Thank you @daveyjp, you're probably right. Ill probably spread across a Lisa (mostly) and a cash isa for now and do a tiny bit of s&s ISA (mightaswell use the allowance) if i can afford to (most likely no).

Eco_Miser

https://forums.moneysavingexpert.com/discussion/comment/81997859#Comment_81997859

Taking money out of a tax-advantaged account does not make past interest taxable, just future interest. The interest on any money in a normal bank account (current or saving) is taxable, although up to £6000 (more usually £1000, could be £500 or £0, depends on your income) could be taxed at 0%. The interest on money in a cash ISA (and the capital gains and interest in an S&S ISA) are exempt from UK tax, and don't even get counted as part of your taxable income. Watch out for the trap with a LISA if your desired home is over the limit.

Go for a global equity, or multi-asset fund, to spread your risk to a lot more than just 500 companies.

For a lot of useful reading on investment for UK residents in particular, rather than the US. see https://monevator.com/highlights/

Good luck with your life, you're making a sensible start.