Absolute novice - where to start with researching investing and saving for a small windfall

[CallTheRozzers]

DS (18) has come into a small inheritance of £25k.

He is saying that he would like to put some of it into a savings account and then invest the rest with the hope of making some profit.

I've never had any spare cash so this is way out of my field of knowledge. I don't know if this is sensible plan or what sort of saving accounts are available that would be best, or where he would start with investing. Would the best thing to do be to see a financial advisor? I don't even know if they advise on small amounts like this!

He's due to start university in September, if that has a bearing.

If anyone is able to give me a pointer on where to start doing some research I'd be so grateful.

Thanks in advance,

Money wanted in the next 5 years - and an emergency buffer - should be in cash savings, not invested. It can go in a cash ISA so there's no tax to pay on the interest.

If he starts a pension now, he gets a government top up of 20% of whatever he puts in, and it has a loooong time to grow. But it's locked in until retirement.

Slightly more flexible is a LISA. Lower limit in what can be put in, 25% top up. Can be used to buy a first house/flat (subject to rules on max cost of the property) or left in until age 60. Unlike a pension it can be withdrawn earlier in an emergency, but you lose the government top up.

Next option is an ordinary stocks and shares ISA. No top up, but all growth is tax free, and you can take money out any time, for any reason, without it affecting your income tax liability. But stocks and shares are volatile (go down as well as up, unpredictably) so don't use this for money you may need immediate access to - you don't want to withdraw when it's down.

Rebel Finance School (Facebook & YouTube) is a good start, especially in helping you to evaluate your own finances and needs and then considering the options to plan ahead.

It isn’t advice, just learning.

If he (or more likely you) uses Facebook, I highly recommend thefireplace group https://www.facebook.com/share/g/1Ho8ZhrFjF/

They are mainly aimed at people planning to retire early, but they're very friendly and knowledgeable. The group founders worked with Rebel Finance for a bit, but found their advice a bit inflexible so have recently set up their own podcast and finance wiki.

Look up AJBELL investment platform. They have lots of free advice. Also tell your son read Psychology of Money, available on Amazon

As for what to invest in specifically, not individual stocks. That requires both luck and a lot of knowledge to do well.

Well diversified index funds are best for beginners - these are 'bundles' of shares from hundreds or thousands of different companies, which automatically track the stockmarket. They have low fees, and over time make a nice steady return - although like all stockmarket investments they do go up and down.

Make sure any savings are put in an Isa to avoid paying tax on the interest. In terms of 'investing for a return' your son needs to understand that returns are something that you typically aim for over 10 plus years. There is no such thing as a quick high value return. Stocks and share ISA could hold up to 20k this finance year.

Following

If he’s starting university won’t he need the money for fees and living expenses? The interest charged on student loans now is absolutely gouging

I'd look in to LISA's and max one out over the next few years if he thinks he may wish to buy property at some point. There is taln of them being scrapped so I'd get in now.

Now is a very good time to buy into S&S ISA (buy the dip)

He should essentially plop 20k into something like vanguard life strategy 80 and forget about it....leave it for 10 yrs or so..

He can keep 5k in low risk cash saver in case he wants a holiday or as a rainy day fund

If he has the cash already, he should put £20k into an isa online tonight, as it is the new tax year tomorrow. You can transfer isa's, so he can do it without having to make decisions on what type of investment yet, or which company to go for. Then he can add the other £5k tomorrow and have it all in an isa. Tomorrow the new tax year starts, so he will lose the allowance for the 2025/6 tax year if he waits until then.

There are lots of providers, including banks, for stocks and shares isa's. Any capital growth and interest is tax free. If he invests in a general investment account, he will be liable for cgt and interest on dividends over.the taxable threshold.