Savings advice for 18yo on a decent salary

[RunningStrong]

DS2 has a take home pay of c. £1500 and very little in the way of outgoings.

He pays me £200, which whilst it's not "enough" in terms of what it would cost him to live elsewhere, it's probably more than it costs me for him to live here (he eats breakfast and lunch at work) and therefore, I'm not comfortable taking more.

He pays for his own phone and Netflix/other streaming subscriptions

He's supposedly learning to drive but not very motivated, he doesn't really need a car and even if he was ready you can't book a test atm.

He pays 10% into the company pension scheme

He pays £200 pm into a homebuyers ISA

He pays £200 pm in to a regular savings account

It's so hard to advise because whatever he does there's no interest on any of these accounts. My only suggestion is premium bonds, which I know aren't always considered a good option but at least there's a bit of fun/possibility

He doesn't really want anything tied up too much in case he does want that car or (eventually) house.

He cycles to work and has clothing provided so his only cost is the (subsidised) canteen

Sounds like he is doing well for that age

Is it possible to increase the amount to his pension. A little extra now could make a massive difference in the long run.

At 18 I’d leave him be, you don’t want to tie up or overcommit his earning in case his future plans change (wanting a car etc). He seems to be saving plenty, planning for his future. Almost half his salary is tied to commitments already. Let him enjoy it and if he really wants to save more talk to him about investments or more in the isa as it’ll benefit him in the long run

If he does want a car that’s £3/400 gone each month on insurance/finance/fuel at least. Don’t over commit

I understand not over committing but a standing order to premium bonds or a savings account isn't committing, it's easily cancelled

I'd recommend increasing the amount into the homebuyers ISA (I assume you mean lifetime ISA: if you aren't certain, check). The government will add an extra £1000 for every £4000 you put in, with your contributions being max £4000 per year. So if he upped that to £300 or ideally £333 per month, he'd be maxing that out - and 25% is a pretty good return.

Other than that I'd recommend putting money into his pension as every bit you put in early works harder for longer so makes you more money to retire on than the same amount put in later.

Let him enjoy the rest! There isn’t that much left!

@Gladioli23

I'd recommend increasing the amount into the homebuyers ISA (I assume you mean lifetime ISA: if you aren't certain, check). The government will add an extra £1000 for every £4000 you put in, with your contributions being max £4000 per year. So if he upped that to £300 or ideally £333 per month, he'd be maxing that out - and 25% is a pretty good return.

Other than that I'd recommend putting money into his pension as every bit you put in early works harder for longer so makes you more money to retire on than the same amount put in later.

£200 pm is the maximum in a Help to Buy ISA

how would he feel about a stocks and shares ISA? If you use one of the managed ones like wealthify, nutmeg etc they do all the investing for you so you don't actually have to know anything about the stock market but if he wanted to get into it it's a good way to dip his toe in the water. You choose a risk factor of 1-5 so 1 you would be very unlikely to lose money but wouldn't make a huge profit (although probably more than 1%, and then 5 would be high risk but high profit. You can split your amount in different ones so could have most in a 2 but £50 or a small amount for 'fun' in a 5 to see what happens. It's very easy to withdraw too so not like normal stocks. I've had on average 7-8% interest in a 3 (medium risk) account for the last year which is pretty good. You canmanage it all on an app too which is good for teens.

You can also get referral codes from people already signed up whereby you would get an extra £25 once you'd invested £400 which is equivalent to, what, another 8% on top? I've got one for wealthify but you might have a friend who's got an account rather than a random off the internet (although I think it's just an email link) or MSE do referral codes occasionally.

I use premium bonds too but some months you get nothing. I think there's a graph on MSE (again, sorry!) that shows you need about £32k invested before you would on average meet the standard interest rate. But I suppose there's always the fun of the draw and it's very safe.

Running Strong - you can also get lifetime ISAs with s higher yearly limit. I think Help to Buy ISAs were phased out for new entrants a while ago. Let me see what I can find.

www.moneysavingexpert.com/savings/lifetime-isas/

I think it covers most of it and it has a comparison of the two at the bottom of the (rather long) article. :)

@RunningStrong

I understand not over committing but a standing order to premium bonds or a savings account isn't committing, it's easily cancelled

But he is putting money in a savings account each month!

@Gladioli23

Running Strong - you can also get lifetime ISAs with s higher yearly limit. I think Help to Buy ISAs were phased out for new entrants a while ago. Let me see what I can find.

www.moneysavingexpert.com/savings/lifetime-isas/

I think it covers most of it and it has a comparison of the two at the bottom of the (rather long) article. :)

I don't think you can have both though?

No, but it is possible to transfer from a H2B to a LISA in some instances. The H2B caps at 12k from you, so 15k total, whereas the LISA doesn't have a cap other than by the number of years. So it depends how long he anticipates saving for and how much. Equally, there's a penalty if you use a LISA for anything other than a first home/retirement so it might not be the right option.