How best to advise DD with ctf money

[bobkate]

My DD is very lucky in that her ctf is at £50,000 and we need to decide where to move it in a couple of weeks time when she turns 18.
I was thinking that it might be a good idea to advise her to save £40,000 in some kind of long term, 10 years ish, pot. Then put £5000 in an easy access saver. She has 'spent' £4500 already ( borrowed from us ) on a car and the insurance, etc so she'll have £500 for an instant splurge if she wants it.
No uni plans atm, but possibly wanting to travel a bit so the easy access saver could boost her meagre wages if needed.
Any thoughts on how to go about the long term investment of £40,000?

If she has aspirations to buy a property then I’d look at putting £4,000 into a LISA this tax year and another £4,000 next year.

Use the rest of her ISA allowance this year and next year for the other long term savings,

I'll have a look at a lisa. Does that mean a other 'ordinary' isa can't be opened in the same year? I presume she would eventually want to own property but will chat to her. I'm asking mainly so we can give her a few diferent options to think about. She has no idea there's this coming to her and think she'll initially be quite overwhelmed!

You can open a normal ISA and a LISA in the same year, but any amount you put in the LISA reduces what you can put in the ISA - it’s a £20,000 overall limit, so you can either do £20k in an ISA or £4k in the LISA (and get the government bonus) and £16k in an ISA.

You can open multiple ISAs in a year as long as you don't put in more than £20k in total. So £4k in a LISA and £16k in an ordinary ISA (cash or stocks and shares).

Has anyone got any experience/knowledge of whether a cash or stocks and shares isa would be better. Also I 'think' the yearly allowance starts in April so could we open one in a few weeks and then do another in April?
So Feb £4000 into Lisa and £16000 into cash isa
April £4000 into Lisa above and ££16,000 into stocks and shares isa...
Could that be a good plan?

Yes you can do one lot now if iSA/Lisa and repeat in April
Stocks and shares will give you better return in the long-term but you need to be prepared to put it away for 5 years plus to really see the gains. (You might get good gains early on but might not)

In all honesty with that amount I would be looking for a sound registered independent financial advisor.

I’d get an IFA with that amount of money and take their advice

If she's going to be running a car, she will need quite a bit in reserve (unless you intend to pay for her insurance, services, MOT, tyres, etc.).

An independent financial adviser will not take her on with only £50k.

Mine did.

Good advice to consider a LISA - it's a viable option as a pension investment, even if not used for a house deposit.

Stocks & Shares are for longer term investments - at least 5 years but ideally 10 years or more. So the time frame matters. Investments are more volatile - they move up and down in value in the shorter term. In the longer term they tend to outgrow savings, and keep pace or even beat the effects of inflation.

A combination of options might suit her:

-For savings needed within 5 years choose a Cash ISA.
-For long term savings of 10 years or more choose S&S ISA,

-For in between 5-10 years, it depends how much risk she wants to take. She might allocate a portion of the S&S ISA to invest in a Money Market Fund which is easily accessible, has low fees and very low risk, but tends to pay slightly more than cash.

One other point - does your DD have a SIPP (self invested pension)? If not, you could help her set one up. It can be tricky to get young people interested in thinking about pensions. If there is one up and running with a small investment already set up, it's easier to monitor and start to invest regular amounts once her salary increases.

At this level of investing, an IFA is really just a sales person selling you financial products - for a fee - that you could very easily research yourself.

Thanks, this is really helpful. I'll also have a look at a sipp/sipps.
We've never had enough to sideline momey for investments so it's a bit of a minefield to navigate.

I would probably not go for a SIPP at this stage with only £50k. She’s likely to want to use the money well before retirement age.

Definitely encourage her to start a pension / join her work pension and pay a reasonable % in as soon as she starts working, though - if she doesn’t get used to having the money to spend she won’t miss it and it will set her up for the future.

Thank you. I've had a quick google re sipps and think she'd likely want the money before that. We willmake it clear the importance of saving for the future.
Thanks for all the advice so far.

I think this is exactly what I would do - a very sensible plan. She then has access to £16k from the cash isa if needed, and the rest is invested. Over the coming years I’d encourage her to put more into the LISA if she’s keen to buy a house