Moral dilemma - investing £12k

[Blueowlnight]

Me and my partner have worked hard and saved up about £12k. We have no debt, other than a mortgage (£215k over 20 yrs). We have a rainy day fund. We both work in public sector and earn a modest income each (we’re both well within the 20% tax bracket!).

We’d like to invest the money some way to make it work for us and help us and our two small children in the future. Investing scares me a little, I don’t understand it and don’t like risk.

Recently, both my little sister and my mum are looking to buy a house. My sister is buying her first home, my mum wants to downsize and become mortgage free (though she said this 18months ago and bought a home she couldn’t afford). I feel like I have an opportunity to help someone here and maybe grow our money?

What would you do? Help my sister and ask for a % of the sale (we could contribute to their mortgage?!)? Help my mum, but risk not getting any return for a long time as she’s not planning on moving again? Just pay off our own mortgage?! Or any other ideas?!

I know we’re very privileged to be in this position, I don’t want to squander it, and also we’d really like to help without risk of losing money.

If you're not sure about putting your money into investments, I'd definitely consider paying it off your mortgage.
The simple maths of that is which interest rate is higher, the mortgage or your ISA? If the mortgage rate is higher, definitely pay it off that, if ISA rate is higher, look at moving to a higher paying ISA (open new ISA and state you want to transfer funds from the old one, then you won't be using £12k of your annual£20k allowance).

Coventry BS are offering 4.12%on a fixed rate ISA currently. I think it is until Sept 2026, it's a way to invest in the short term getting a fixed return with no risk to your capital.

On no account lend money to family unless you’re prepared for it to be a permanent gift, there are literally dozens of threads with horror stories.

The best thing you can do is make a lump sum repayment on your mortgage. I know it sounds boring, but there’s no risk of loss and you get a guaranteed return (in terms of being able to pay it off earlier). No other investment will come close.

Don't mix your finances with your sister or your mum, OP. You really don't have enough so that it wouldn't matter if you lost it. Your mum deliberately chose a house that was too expensive for her. Even if you could invest in your sister's home it would be really unwise to - what if you fell out with her or her partner? You would have to say that money was a gift to her - she or he might take that literally, especially if you've fallen out.

I wouldn't save any more for your children - it's great you're using your CB to save, but you need the money more than they do right now.

£12K isn’t much if things go south so. Invest a part through a financial advisor and keep at hand the other part.

good luck!

Don't get your family involved in any of your investments, it will get ugly.

Yes, I'm shocked by this too.

Even if you can only save a relatively small amount in an ISA it's always worth doing, always assuming that you have a manageable mortgage. I've had S&S ISA's for years (in fact since they were PEPs) and now have a substantial nest egg. The OP is very lucky to have a public sector pension to look forward to, so can afford to take the very small risk that a tracker-type fund would entail.

I've just inherited similar amount of money to you OP, and stuck it in Trading 212's Cash ISA as I'm getting 4.92% rate. We're currently on a fixed mortgage rate of around 2% so doesn't make sense to make extra payments when it will earn more in the ISA. Also want to be able to access it if needed (and want a nice holiday in an couple of years). It was super easy to open the account with T212 btw.

I'm reading the PP with interest though as don't know anything about investing!

The index fund inside a S&S ISA is the best advice on the thread so far (assuming your mortgage is at a low rate). I would go with Vanguard over a platform like Trading 212. It will give you solid guidance and won’t try to tempt you into short term trading.

I would put some into an easy access ISA in case of rainy days and if you are risk averse into a fixed term ISA say 2 or 3 years with a rate of interest of 4% or more, look into comparison sites to find the best rate.

Go and see an Independent Financial Advisor re investing & the best vehicle for you- pensions/ stocks/ ISAs etc. Make sure they are truly independent and can advise on whole of market and are not tied to a particular platform which may have high fees etc. Don’t ‘invest’ in your sisters (or anyone else’s) home. It’s a recipe for disaster.

Stocks and shares isa pick a tracker fund with low fees. Or pay it off your own mortgage if no early repayment fees.

@Pinkrabitt do you mind if I ask how you’ve achieved this? My little ones junior isa has definitely not made that much

Don't lend to friends or family - can be the source of much heartache when it goes wrong. Put the money in a private pension (SIPP) to get tax relief on your contribution or if you don't want to do that invest it in an All World index fund.

Before you decide how to invest your money, I strongly recommend watching Rebel Finance School on YouTube. It will teach you about investing and it's for free. I watched it 2 years ago and it was an eye-opener. I learnt so much.

This thread has been so helpful, we have a mortgage on a low interest rate for another two years but have £50k in premiums bonds which i am really thinking of moving as the return is only around £3k a year, I really don’t understand ISAs at all so I’m going to look at vanguard and 212 thank you

i also have my child’s trust fund with NatWest I wonder if I should transfer that too?

I have them in Foresters Junior ISA. Honestly, I checked them the other day having not looked at them for years and was shocked to see the value had doubled since 2023. I pay in my direct debit every month and so essentially forget about them. Nothing to do with any investing prowess on my part!

I recommend looking up Rebel Finance. They have a great FB page too. May have already been mentioned. NRTFT.

You will never earn as much in interest as you would save paying off some of your mortgage. The interest rates speak for themselves. Your monthly payment would also go down. If you are in the enviable position of having money left over I would encourage you to overpay your mortgage payment with every penny.

A lot depends on timing of investments - there was a dip in the stock market in 2022 so by investing in 2023, you missed out on that

I invested a lot in 2020 when the markets were low during COVID and have done really well with that

I've been investing in them for years, my DC are teenagers now and I started with the £500 free child trust fund (which I think no longer exists).

If you have any spare money at the end of the month its really worth starting a direct debit when children are born as 18 years of growth in a S&S ISA is a really effective way to invest for them. My DC have known since they were small that we are saving money for them and it is only to be spent on university fees/house deposit etc. They are sensible and I have no fear of giving them access at 18.

I've been investing in them for years, my DC are teenagers now and I started with the £500 free child trust fund (which I think no longer exists).

If you have any spare money at the end of the month its really worth starting a direct debit when children are born as 18 years of growth in a S&S ISA is a really effective way to invest for them. My DC have known since they were small that we are saving money for them and it is only to be spent on university fees/house deposit etc. They are sensible and I have no fear of giving them access at 18.

Sorry not sure why it posted twice

I can’t understand why you would put the money into your sisters house? So you would, just between the two of you and not officially, have a percentage of her house that she would have to give you when she sold. What if she never sold her house? And if she does in order to buy somewhere bigger how will she be able to afford to give you that equity when she’ll need it to buy up the ladder. Plus what if she doesn’t give it to you? You can’t have a contract or charge on the house.

I also can’t understand why it’s a moral dilemma? Do you feel all families should share their money around?

If you want to invest it in a house pay off some of your own mortgage, but keep paying the same monthly amount to shorten your term. You’ll save quite a bit.

Or as pp have said, learn how to use interactive investor and stick it in some etfs. Gaming has had amazing gains this year and defence will undeniably be somewhere to make money.

What age are you?

More risky stuff is better to do when you have time to recoup if it goes wrong.

Under no circumstances invest in anyone else’s property.

I assume you are not married as you wrote partner. Put it in either a S&S ISA if you do not think you will need it or a cash ISA and look at best rates. If you are a customer some institutions have better deals and rates for their own customers. Just make sure to not put anything in a joint account with your partner..

We make approx 8% annual returns but it varies, many years ago I made a 25% return but I was still very young and took a risk, DH has made around 20% one year but then some years we have lost out with one year being especially awful.