What to do with the £500 in CTF

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My dc was 18 earlier this year and whilst sorting out paperwork I remembered the CTF. It looks like there is still approx the £500 in there that was put in 18yr ago. What is the best thing for them to do with this? They also have another 2k in savings at the moment just in a current account.

They are off to uni in September and keen to move this money out of their current account to avoid temptation. They are planning to get a pt job at university, and are fairly sensible and want to avoid accruing any more debt than necessary.

Any thoughts? Thank you

Think about timescale for when the money will be used.

If it is for a future home deposit and they feel they can lock it away, then they could use a Lifetime ISA. However they must not access that for any other reason than to buy a first home, as otherwise they will have a penalty which is higher than the bonus they get.

Banks have linked savings accounts, some are paying 4%+. There are fixed term ISAs available, 6 months, 12 months, 2 years.

They could invest the money, but that is for long term... at least 5 years, ideally longer.

I would expect that this money is an emergency fund. A pot of money which they could access if an urgent need arose. Therefore it should be in an account which is accessible without a high penalty. So a savings account or Cash ISA.

Thank you that's very useful. We are thinking of opening a LISA for them with just £10 or so, so that they've done the year needed before graduating. But am I right in thinking this account can be transferred into a pension if not used to buy a property?

Ideally with this money, I think it may be better with a different account provider so that they can't just transfer it across between accounts easily to take away temptation!

Last week my daughter opened an account with Skipton.
It's a great rate, but accessible. She isn't planning to use any of it, but could get it if needed.
Similar amount (slightly less).
She has another bank account for her waitress wages and general spending, but this has no interest rate to speak of.

Bonus Saver. 4.45%