Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

Search
  • FIRST POST
    • Hellsbellshg
    • By Hellsbellshg 12th Jan 19, 4:51 PM
    • 5Posts
    • 5Thanks
    Hellsbellshg
    Should I use Lifetime ISA to save for my young child long term?
    • #1
    • 12th Jan 19, 4:51 PM
    Should I use Lifetime ISA to save for my young child long term? 12th Jan 19 at 4:51 PM
    I'm trying to work out the best way to save for my 1 year old child. I do not want a standard child ISA because I do not want him to access the money at 18 years old, I'd like to keep control of the money until he is well into his 20's, established in a career and then I'd like him to use the savings as a deposit for a house ideally. I'm 37 this year so wonder if I should use a Lifetime ISA in my name to save for him? When I turn 60 and can access the money he will be about to turn 25 which is what I had in mind timescale wise anyway. What do people think? Is this a crazy idea? Aside from the obvious issue of not being able to access the money earlier without the fees incurred for this, I cannot see any other downside and could make a huge chunk of interest for him with the 25% they offer annually. Any advice or thoughts are welcome. Thanks :-)
Page 1
    • Alexland
    • By Alexland 12th Jan 19, 4:58 PM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    • #2
    • 12th Jan 19, 4:58 PM
    • #2
    • 12th Jan 19, 4:58 PM
    Yup we are both filling our S&S LISAs each tax year to both gift money to our children in their 20s and also to recycle some into my wife's pension for further government contribution.

    We are using JISAs and S&S ISAs for uni costs etc.

    Alex
    • fiestaman87
    • By fiestaman87 12th Jan 19, 4:59 PM
    • 54 Posts
    • 107 Thanks
    fiestaman87
    • #3
    • 12th Jan 19, 4:59 PM
    • #3
    • 12th Jan 19, 4:59 PM
    Hi Hellsbellshg and welcome,

    The issue here is the 18th birthday. Legally he can touch the money then and do what he likes with it. I would like to think if I was in that situation now I would teach him financial sense so he doesn't blow the money on his 18th and instead invest it wisely until he's ready to put the deposit down for a house.

    It's a tricky one.

    I'm holding inheritance in trust for my 2 teenage children till they're 18. I do hope that then they have the sense to spend (or invest) the money wisely and that my drumming in to them to save for the future will pay off.

    I wish you the best of luck.
    Total Savings: HSBC £2,500.00, Marcus £260.13, TSB £1,500.00, Virgin Money £1,250.19 - Total £5,510.32
    Save 12k in 2019 Challenge - £,1753.13
    Total Debt: Barclaycard (0% APR) £2,550.00, Santander CC (0% APR) £3,821.00, Santander Loan (3% - for car) £3,956.87, Mortgage £50,344.40 (1.5% APR) - Total £60,672.27
    • Hellsbellshg
    • By Hellsbellshg 12th Jan 19, 5:01 PM
    • 5 Posts
    • 5 Thanks
    Hellsbellshg
    • #4
    • 12th Jan 19, 5:01 PM
    • #4
    • 12th Jan 19, 5:01 PM
    I was thinking a cash lisa??
    • Alexland
    • By Alexland 12th Jan 19, 5:03 PM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    • #5
    • 12th Jan 19, 5:03 PM
    • #5
    • 12th Jan 19, 5:03 PM
    fiestaman87 you need to be 18 to open a LISA so the OP is considering using their LISA and gifting at age 60+.
    • Hellsbellshg
    • By Hellsbellshg 12th Jan 19, 5:05 PM
    • 5 Posts
    • 5 Thanks
    Hellsbellshg
    • #6
    • 12th Jan 19, 5:05 PM
    • #6
    • 12th Jan 19, 5:05 PM
    Fiestaman87 do you think a lifetime cash isa is bad idea? It would pay significant more in interest than child isa and allows me to decide when he’s ready for the money although we wouldn’t be able to access till I’m
    60.
    • Alexland
    • By Alexland 12th Jan 19, 5:06 PM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    • #7
    • 12th Jan 19, 5:06 PM
    • #7
    • 12th Jan 19, 5:06 PM
    Hellsbellshg the low interest rates on Cash LISAs make them unsuitable for 20+ years as every year inflation would erode the spending power by a couple of percent. To stand a good chance of achieving a return equal or above inflation you would need to go down the S&S route.

    Alex
    • Tarambor
    • By Tarambor 12th Jan 19, 5:12 PM
    • 4,697 Posts
    • 3,608 Thanks
    Tarambor
    • #8
    • 12th Jan 19, 5:12 PM
    • #8
    • 12th Jan 19, 5:12 PM
    Fiestaman87 do you think a lifetime cash isa is bad idea? It would pay significant more in interest than child isa and allows me to decide when heís ready for the money although we wouldnít be able to access till Iím
    60.
    Originally posted by Hellsbellshg
    I think the whole idea of controlling what happens with a child's money when they're an adult is a bad idea. It sends two messages:

    1) You don't think you can do a good enough job of bringing them up to be responsible and know about personal finance.

    2) For their side it demonstrates you have no faith in them and you want to continue to treat them as a child even though they're an adult. How many times as a young adult did you wish your parents would stop treating you as a kid?

    And the final point. If you don't manage to put it in something that at least matches inflation you're giving him less. Say there's £10,000 in the fund when they're 18 but you're not intending to give them it until they're 25. You're basically saying "Happy 18th birthday son, here's your £10,000 25th birthday present which will only be worth £9,000 in today's spending power on your 25th birthday."

    And who is to say they'll be responsible with money when they're 25? If you've not given them the opportunity earlier in life they're just as likely to blow it on crap at 25 as they are at 18. And then what, you decide at 25 they're still not responsible and keep it for another 5, 10, 20, 30 years? What if he decides he doesn't want to buy a house? After all in the EU the UK is a bit of an anomaly when it comes to home ownership, much of the rest of the EU renting is commonplace. And what if he doesn't have a career as well? Does he forfeit that money? And assuming you put it in a Lifetime ISA in his name and he doesn't buy a house not only will he not get it in his 20s, he may not actually get it until retirement age at which point that £10,000 could have the equivalent of £1,000 spending power when they were 18.

    It is one of those things that seems to be a good idea to a lot of people but in fact is the polar opposite for many reasons if not just damaging the relationship between a parent and child as the child gets the message their parents don't trust them.
    Last edited by Tarambor; 12-01-2019 at 5:23 PM.
    • Hellsbellshg
    • By Hellsbellshg 12th Jan 19, 5:17 PM
    • 5 Posts
    • 5 Thanks
    Hellsbellshg
    • #9
    • 12th Jan 19, 5:17 PM
    • #9
    • 12th Jan 19, 5:17 PM
    I wouldnít have minded them keeping some savings aside for me till I was well into my 20ís and then giving to me when I was thinking more responsibly and long term e.g buying a house, starting a family etc. As opposed to me potentially spending it all on travel, car, etc etc. Iím not looking for criticism about the way and when Iíll give my child the money Iíve saved for him, just the best way to do it with my outlook and preferences. I just want to ensure he can achieve stability as an adult.
    • Alexland
    • By Alexland 12th Jan 19, 5:17 PM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    But its not the child's money if it in the parents LISA? It is a nice gift in their 20s.
    • fiestaman87
    • By fiestaman87 12th Jan 19, 5:33 PM
    • 54 Posts
    • 107 Thanks
    fiestaman87
    Hellsbellshg,

    My advice to you is save as much money as you can in a child ISA and other top paying child savings accounts. As your son approaches 16 or 18 (dependent on the account) go through the options with him including the LSA or Help to Buy ISA.

    It's good that you're saving up for him (I wish I could have done so when my children were that age) but always remember who's money it is.

    BTW if you already have a mortgage yourself I don't think you would be eligible for either the LSA or Help to Buy ISA.
    Total Savings: HSBC £2,500.00, Marcus £260.13, TSB £1,500.00, Virgin Money £1,250.19 - Total £5,510.32
    Save 12k in 2019 Challenge - £,1753.13
    Total Debt: Barclaycard (0% APR) £2,550.00, Santander CC (0% APR) £3,821.00, Santander Loan (3% - for car) £3,956.87, Mortgage £50,344.40 (1.5% APR) - Total £60,672.27
    • Alexland
    • By Alexland 12th Jan 19, 5:42 PM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    Argh this is so frustrating. Yes the OP if UK resident can open a S&S LISA if under 40 regardless of if they already own property and contribute until 50 then withdraw at 60 and gift the money (inc accumulated bonuses) to be spent on anything the 20 something wants.
    • fiestaman87
    • By fiestaman87 12th Jan 19, 5:49 PM
    • 54 Posts
    • 107 Thanks
    fiestaman87
    Argh this is so frustrating. Yes the OP if UK resident can open a S&S LISA if under 40 regardless of if they already own property and contribute until 50 then withdraw at 60 and gift the money (inc accumulated bonuses) to be spent on anything the 20 something wants.
    Originally posted by Alexland
    Sorry, didn't realize that about the LSA.

    Thanks for clarifying.
    Total Savings: HSBC £2,500.00, Marcus £260.13, TSB £1,500.00, Virgin Money £1,250.19 - Total £5,510.32
    Save 12k in 2019 Challenge - £,1753.13
    Total Debt: Barclaycard (0% APR) £2,550.00, Santander CC (0% APR) £3,821.00, Santander Loan (3% - for car) £3,956.87, Mortgage £50,344.40 (1.5% APR) - Total £60,672.27
    • Hellsbellshg
    • By Hellsbellshg 12th Jan 19, 6:06 PM
    • 5 Posts
    • 5 Thanks
    Hellsbellshg
    Thanks everyone for your comments apart from the savings police Tarambor lol. Thanks for alerting me to the S&S Lisa Alexland I hadn’t thought to look at those only the cash Lisa. If saving in my name and gifting to my son later on means we make a significant amount more in interest and bonuses then I’m not about to look a gift horse in the mouth, I’m his mum and clearly not going to rob him of what is meant for him, it’s me choosing to save for him in the first place!
    • Alexland
    • By Alexland 12th Jan 19, 6:22 PM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    Sorry, didn't realize that about the LSA.
    Originally posted by fiestaman87
    You were correct about the HTB ISA which you cannot open or hold if you have owned property.

    The LISA is a dual purpose product to both help people to save for their first property purchase or invest for retirement. Some of us parents in our late 30s have noticed that it also works quite well for future child gifts.

    Of course it is not suitable for money that has already been gifted as that would already be the child's money and the parent should not stop them getting access without penalty at 18.

    Alex
    Last edited by Alexland; 12-01-2019 at 6:24 PM.
    • Sea Shell
    • By Sea Shell 12th Jan 19, 6:24 PM
    • 1,332 Posts
    • 2,447 Thanks
    Sea Shell
    Why not put a bit in both, so your son has something of his own at 18, with the rest to follow when you see fit.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
    • Alexland
    • By Alexland 12th Jan 19, 6:52 PM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    Thanks for alerting me to the S&S Lisa Alexland I hadn’t thought to look at those only the cash Lisa.
    Originally posted by Hellsbellshg
    My view is the most attractive S&S LISAs are provided by Hargreaves Lansdown and AJ Bell YouInvest and the choice depends on the pattern and amount you intend to contribute. AJB has a lower percentage fee but charge £1.50 per fund trade which are free on HL.

    Then for fund investments consider the Vanguard LifeStrategy or Blackrock Consensus (discounted on HL) series. These are available for different risk profiles. Alternatively consider the Vanguard Target Retirement 2040 fund which will automatically reduce volatility as the target withdrawal date approaches so it is less of a problem if stockmarkets crash just before you intend to withdraw.

    Your money will go up and down which might take some getting used to and beware the temptation to sell when you see it going down. Often when its really looking down that's a good time to put more in!

    Alex
    Last edited by Alexland; 12-01-2019 at 6:55 PM.
    • kidmugsy
    • By kidmugsy 12th Jan 19, 8:03 PM
    • 12,480 Posts
    • 8,846 Thanks
    kidmugsy
    Thanks for alerting me to the S&S Lisa Alexland I hadnít thought to look at those only the cash Lisa.
    Originally posted by Hellsbellshg
    Personally I'd be inclined to indulge in market-timing. That is, while market values look excessively high (at least in the US) I'd use a Cash LISA. When I feel they are better value I'd transfer to an S&S LISA. The challenge is that you will have to screw up your courage and do the transfer at some point.
    Free the dunston one next time too.
    • Herbalus
    • By Herbalus 13th Jan 19, 8:32 AM
    • 2,290 Posts
    • 1,964 Thanks
    Herbalus
    Personally I'd be inclined to indulge in market-timing. That is, while market values look excessively high (at least in the US) I'd use a Cash LISA. When I feel they are better value I'd transfer to an S&S LISA. The challenge is that you will have to screw up your courage and do the transfer at some point.
    Originally posted by kidmugsy
    Iím not sure somebody who has just learnt about the existence of S&S LISAs should be tempted to consider playing the market.

    Judging whether a market is overvalued is probably best reserved to those with a bit more experience, and I am under the impression that the OP is new to investing.
    • Alexland
    • By Alexland 13th Jan 19, 8:51 AM
    • 4,707 Posts
    • 4,043 Thanks
    Alexland
    Iím not sure somebody who has just learnt about the existence of S&S LISAs should be tempted to consider playing the market.
    Originally posted by Herbalus
    Yup although markets are always volatile the probability of any of those broad diversified S&S funds mentioned above under-performing a Cash LISA at the end of 20+ years is low.

    Alex.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,266Posts Today

6,760Users online

Martin's Twitter
  • RT @AskJames: Someone quickly marry me so I can justify buying this. I do. "Tesco is selling a five tier wedding cake made of cheese - an?

  • Today's FRIDAY twitter poll: Draconian & absurd new laws by May/Corbyn/EU/Trump/Putin (pick ur own scapegoat) dicta? https://t.co/umCa8jP7LT

  • Now come on that's a bit unfair!!!!! I could've done a handstand (well headstand) first if you'd asked! Sheesh! https://t.co/01Pf9Z99B1

  • Follow Martin