19year old inheritance

k_f0x · 16 March 2016 at 9:48AM

Hi,
My 3 siblings and I lost our Dad last year and are due to inherite around £90k each. My 3 siblings are putting £50k together each to buy a property they will live in as our mother is estranged from us. My sisters are 19 and 20 and my brother is 23.
My 19 year old sister is due to go to university in Autumn this year and I was wondering what is the best way for her to save her remaining £40k. As we essentially are parentless now and she is so young it is important the savings are maximised to their full potential to help secure her financially for the future.
Any advice would be very much appreciated.
Many thanks

xylophone · 16 March 2016 at 10:57AM

In theory, as she is over 18, your sister is eligible to apply for high interest current accounts.

However, as she is still at school and will then be a student, it may be that this avenue will prove not to be open to her.

In due course,she should look to open the student current account that best suits her circumstances.

She might like to use a combination of a stocks and shares ISA, an instant access account for emergency savings and a fixed term bond.

http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

For example, she might open a stocks and shares ISA with say Charles Stanley and invest £15,240 in the Acc units of an equity income or distribution fund.

She might hold say £2000 in the easy access account - see above.

She might hold the balance in a three year fixed rate account (see above) and then reconsider her options after graduation.

enjoyyourshoes · 16 March 2016 at 11:09AM

There is also a help to buy ISA. (up to £12K paid in gradually and earns 4% interest (Halifax) and Gov pay 25% billy bonus when used to buy first home.

Student finance is also a debt (she is off to University) and you start attracting interest charges for both the maintenance part and the tuition parts. If you do not pay off the accruing interest you will be charged interest on interest (Compound interest). You could look into funding the costs through the inheritance. Check out for bursaries the Uni can offer to reduce the amount they fund.

As above comment mentioned look at highest interest bank accounts (Santander, TSB, Lloyds, M&S, but check eligibility and criteria to earn the interest.

Look also at regular savings which are annual accounts that you have to save per month; this should be funded from one of the above high interest accounts to earn interest on the initial £ ammont. At the end of the year you will have to find a great place for the accumulated cash and set up another. (highest is 6% interest) (HSBC, First Direct, TSB and Lloyds to name a few) Again check details on this website.

Could she buy house outright in the Uni town and thus avoid rent payments but benefit from rental income (check income thresholds)

enjoyyourshoes · 16 March 2016 at 11:14AM

Just thought:-

The siblings ought to look at help to buy ISA (if not homeowners) and see if timescales fit into their plan and the accrued 25% bonus is beneficial.

Also start pension SIPP (govt pays in 20% for none tax payer too)-longer term thinking.

A balanced approach across suggested options may be best?

diamonds · 16 March 2016 at 11:23AM

I go with uni property, the fact equity is available in the shared property a small mortgage will provide cheaper housing at uni and if 2 bedroomed a income. Having equity, a student loan income and a part time job she should get a small mortgage no problem.

atush · 16 March 2016 at 11:50AM

Sorry for your loss, and for your unfortunate lack of a good mother.

For the university student, if she buys a home with the other 2/3, will the home have a mtg? How will she afford this?

If no mtg, then she should look at a diversified approach (and that means NOT buying another home as that would be the opposite of diversified to hold only property.)

She should open a pension, putting in 2880 which the govt will boost to 3600 with Tax relief. then opn a S&S isa, filling this. This would mean just over 18K in investments. The other 22k+ could be put into cash accounts as described above. She should also see how having this money will affect any student grants she can use to help pay for university.

This approach will see her have a property to live in (and be invested in), equity investments for now and the long term future, plus a large cash safety fund. So very diversified.

Do you need any help with your own plans?

kidmugsy · 16 March 2016 at 3:29PM

Perhaps she should consider not joining in the sibling purchase, and instead buy in her uni town? Or perhaps all three might consider the help-to-buy ISA and the new Lifetime iSA (due in April 2017). https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508176/Lifetime_ISA_final.pdf

But they may prefer to push ahead with their plans. I hope they've consulted a lawyer about buying as tenants-in-common, and whether they want to adopt a deed laying out what is to happen when one wants to move out and get his or her capital out of the property. At their tender ages, renting a house together first might be a prudent, cautious move.

Mojisola · 16 March 2016 at 4:35PM

kidmugsy wrote: »

I hope they've consulted a lawyer about buying as tenants-in-common, and whether they want to adopt a deed laying out what is to happen when one wants to move out and get his or her capital out of the property. At their tender ages, renting a house together first might be a prudent, cautious move.

They'd be very foolish to buy together without doing this.

littlegreenfrog_2 · 16 March 2016 at 5:16PM

I wouldn't recommend that she use it to pay for uni fees upfront, as if she doesn't earn enough after graduation she will not have to pay back the full amount anyway. As others have said, she should diversify. Keep some of it in high interest paying current accounts where she can access it straight away if she needs to. Maybe drip feed it into some of the best regular savers. Keep some in notice accounts where she can get hold of it in the medium term but can't spend it on a whim. Putting some in a pension would be an excellent idea, as the long-term compounding effect of saving into a pension means that the earlier you start, the quicker and bigger your pot will grow. Most people who go to uni don't start earning until they are a few years older than your sister and can't afford to pay significant pension contributions until much later, by which time the most valuable years are lost from the point of view of compounding. If she invests some of it now, she'll have a great headstart.

zagubov · 19 March 2016 at 11:49AM

Another vote for llittlegreenfrog's suggestion about the pension and the others' idea of a rental property.

Throwing money at the student debt at this point would feel like a wasted investment if her salary doesn't climb for any length of time; she'll come to regret prioritising it over pension and property.

diamonds · 19 March 2016 at 5:45PM

zagubov wrote: »

Another vote for llittlegreenfrog's suggestion about the pension and the others' idea of a rental property.

Throwing money at the student debt at this point would feel like a wasted investment if her salary doesn't climb for any length of time; she'll come to regret prioritising it over pension and property.

Property asset will not affect any student loans or grants, cash may well do so, a 2 bedroom with small mortgage and tenant lodger with no council tax, student loan and part time work would make a very comfortable student life, on completion stud loans could help to be cleared with a free £2000 graduate account with Santander is currently 0%, or a transitional period finding a qualified job (whilst working any old number full time).

19 year old with no parents will qualify for any full grants available and a maximum student support via onsite educational discretionary help, owning property will not effect this help, having a small mortgage on a second uni property and no parents to contribute (as per student grants and loans legislation states) will get her maximum help to study and living costs. Top that up with a lodger and part time job and its a life most students would love. 2 property assets will already be in her pension pot.

19year old inheritance

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