Concerned about DDs financial position

[Clinkanddink]

Long story short without being too identifying ideally, my DD is in her late 20s, she earns an amount that most would class as a high earner, lives in a flat share, is paying a high amount into her pension (12%, employer matched), has a significant amount of savings in a low interest savings account (from inheriting her grandparents property as they decided to skip a generation for various reasons), she maxes out her stocks and shares ISA every year but this is the extent of her investments.

Today she came to me for advice. She told me was feeling a little worried as she isn’t doing much with the money she has her reasons were as follows
She is likely to buy in the next 5 years and need the money for a deposit (London living so while it would buy a family home outright in much of the country or a flat in many parts of London, it’s likely to be used as a deposit by her) so doesn’t want to invest incase it loses value and her research suggested any money needed in 5 years or less shouldn’t be invested as it’s not long enough for any market dips to recover.
She doesn’t want a buy to let as she feels it ties her down, and the new renter reforms scare her.
She doesn’t want to buy now and get a lodger as she likes the flexibility of renting and is undecided on if she will move abroad.

Basically she has a lot of money doing not a lot and every month that amount grows as she earns significantly more than she spends.

She seems extremely reluctant to change any of this and frankly I’ve never been in her situation so don’t know how to advise. She said “I feel like I have money right now, that I haven’t matured enough to use”.

Im now worried she is effectively losing money due to inflation and will realise when the time to buy does come she doesn’t have the spending power she hoped she would.

AIBU to be concerned by this? Does anyone have any advice?

It’s nothing to do with her best friend not being ready. It’s that she isn’t ready to live on her own and give up the mobility or freedom not being tied down to a mortgage provides (her words not mine).

Ignore the meanies op. That said there are a lot of very valid comments about she doesn’t want professional advice but she does want yours, and that she clearly doesn’t know what she wants. Does she only want to buy a house to live in? Not as an investment? Then she should invest the money in something liquid as she clearly has no intention deciding her life enough to confirm where she’s living any year soon. She need an easy access isa or a fixed term one with a term of 2 or 3 years. Until she’s set that up, she should make sure to burn /snip /shred some cash every day, so she can see visually what her financial management is accomplishing.

It sounds like she’s incredibly financially illiterate. As a consequence she is steadily wasting the potential of the assets her GP left her. I image they’d be pretty appalled by her actions.

There is so much information available online to assist people in how to place money dependent on their circumstances. The fact she appears unwilling or unable to do this is a huge red flag. I’ll wager that she’ll end up in a far worse financial position later in life than she should be in as a result of this and will live to regret her actions.

This is either a big fat humble-brag or just the old classic cost of living rage bait.

God the vitriol on this thread!

OP - your daughter doesn't need an independent financial advisor. I'd pose this question on Rebel Finance School FB page where she'd d get sound advice from financially savvy people not insults from posters with a chip on their shoulder.

She sounds pretty clued up.

She is correct.

stocks and shares are long term investments. They’re not appropriate if she is planning on using the money in the next five years or so.

i also would not be buying a property now if she is expecting to change location a few times. The renters rights act mean that acting as a landlord will be significant hassle for her and doing it from abroad will be difficult.

a friend of mine bought a flat in Birmingham at the start of her careeer and then couldn’t sell for many years, it was a real hassle.

some of the money should go in an instant access a account in case of emergencies. The rest, fixed term bonds is best for. But instant access just means she’ll sacrifice a bit of interest.

she is doing the right thing.

🙄

What a load of cobblers - she sounds really sensible imo, but mumsnet always finds somewhere to stick the knife. On other threads a mixture of investments and cash is key and I’d get berated for not holding much money in cash. And on another she’d be told off for not having more fun with it.

I assume OP that the situation is that she’s maxed out ISAs and LISA but still has some she can’t put in. Premium bonds are also tax free. And you can use the same investments/ savings products as your ISA with more money but outside an ISA and pay tax. There are loads of apps that allow you to move money easily.

Ultimately though investments carry risk, which also isn’t ideal if she wants to buy a house in 5 years time - that isn’t that long. So I’m not absolutely sure that what she is doing is actually wrong.

By the way I once knew a guy who was a financial advisor who took out a loan over 15 years to buy a car 🤣🙈

Tell her to check out the Rebel Finance School course on YouTube and join their Facebook site - excellent free information which will outline other shorter term investment options.

Sorry i am not clear what advice she is asking for? She is saving a deposit to buy a house which will take five years and she doesn't want to invest it so it is in savings and she is certain about that decision so what is she seeking advice about? This is the wrong forum to ask whatever it is she is asking - she sould sign up to the forums on Money Saving Expert where there are separate forums for both house buying and savings and investments.

Pay for a financial advisor

I 100% understand her position... the social contract is broken in the uk. She's lucky enough to have this inheritance and like most people fearful about the gloomy economic outlook... on top of that she is almost petrified she's "throwing away her shot" if she gets it wrong.

Reddit henry reddit is a good place to start.

I'd look at a good financial advisor
She should be looking at a well advised S&S isa despite "risk" as well as VCTs (i use a financial advisor for this as have no clue what im.doing with that)

I can recommend a small firm in london i use if you would like. (Dm me)
I reccomend them because they are good, not pushy and are qualified / knowledgable about a large array of products that means i habe good choice on accessing various products.

My personal opinion: holding out and renting might be no bad thing i see a housing in uk going the way of japan.
I think millenials and gen z are a bit fucked here (the idea your house can be your pension is a bit laughable for these gens) but gen x upwards will do okay due to buying at lower prices so bigger delta / having more equity due to property gains on previous places.

She should pay for some financial advice. It doesn’t matter if she has money not doing anything; it’s not life or death and eventually she’ll find a way forward.

She seems to be doing OK. Putting a significant amount of money aside while retaining flexibility.

There's disadvantages to whatever she does with the money.

S&S aren't necessarily a bad choice because they could still beat cash in the short to medium term (mine certainly have over the last 2-3 years) and if the market is down when she wants to buy, she could just take a larger mortgage, which she could probably afford, and pay it down when they've recovered.

As a high earner, she'll pay a lot of tax on cash savings, so the return will always be poor so she probably wants to not hold a huge amount of cash.

She could do a lot worse than put £50k in premium bonds as she should average close to the 3.6% payout rate, which is worth 5% or more to a high earner as they're tax free.

Depending on her current level of knowledge, something like the Rebel Finance school could be worthwhile.

Utterly stumped as to why she believes her own research is the be all and end all, and has not thought that maybe professional financial advice from a qualified, experienced and well referenced financial advisor may throw up possibilities and considerations her research has missed?

The OP is as entitled to post here for advice as anyone else. Your comment looks petty and envious, it’s not a good look.

🤣

Agree with seeing a financial advisor, also don't have all savings with one bank/building society/other financial institution.

The reluctance to live alone needs to be tackled, as it will happen to many people one day, and better than being with people who are unpleasant or worse.

Why should she?

She should buy property .
I was in her position in late 20s and getting a foot on ladder is key.
dont let her flatmate hold her back.
leverage where possible. Renting is lining other people’s pockets at the end of the day

Well she’s probably right. Savings accounts are paying reasonably interest rates, particularly if she’s locking it away in term accounts. I wouldn’t invest with that horizon, and wouldn’t pay a financial advisor either. She might not be maximising her return, but she’s balancing it with her risk appetite and adding to her savings to make every month which means they’re not going to entirely erode away - and inflation over a five year period isn’t going to make a material difference.

So let her make her choices, there’s nothing to worry about.

Well done on your daughter for being so financially secure but also seeking advice....
Financial advisor would seem sensible. Also look into premium bonds for her 5 year cash....

Buy gold, obviously

She really should consult an IFA.

she can put £50k in premium
bonds.

there are some good safe 5-year ethical investments available eg Abundance council bonds.

NS&I also has fixed-term bonds.

DD should employ an accountant.

When DD does her tax she should ask for some advice about her investment strategy - with the aim of wealth creation and owning her own home.

My adult DS is also in a very good financial place, he lives at home with just DH and I. I do nag him twice a year to sort out his money. He also maximises his cash ISA allowance, the rest is in savings bonds and easy access savings accounts. He did try premium bonds, but hardly won anything, so he put that money back in bonds. He’s not interested in stocks and shares and although he would have a nice deposit on a home, he would still need a significant mortgage at the moment. His younger brother moved out with GF earlier this year, they’ve not had it easy, lots of complications with property and this has put my other DS off owning anything on his own for now.