young adult financial advice

[mangosorbetto]

My daughter will turn 18 soon and with a combination of money she has saved herself and savings that other family members will be giving her she will have around £10,000. I really want to support her to make the most of it, but it is significantly more money than I've ever had so I'm a bit clueless. She doesn't know how much money there is yet, she's probably expecting it will total a few thousand, but is happy to take advice and is showing no signs of wanting to spend any!

She plans to go to university next year, she'll be entitled to more or less the maximum student loan and possibly some other grants. She has no desire to learn to drive at the moment and the universities she's looking at will mean it's not going to be necessary for day-to-day life while she's there. It's unlikely she is going to need this money in the next few years.

She's a bright kid and is planning to do a degree that could lead to some well-paying careers but at this point she's not particularly financially motivated, so who knows. I am unlikely to be in a position to assist her in any significant way financially in the future (e.g. house deposit etc) so I feel like it's important I help her make the most of this.

The options seem to be a lifetime ISA? It seems a good deal but there's a risk that she won't want to buy a house, or will move abroad, or will need the money for something else.
Premium bonds? I don't know realistically how much money you'd make.

A general ISA? Has anyone lost money in a stocks and shares ISA that they've had for e.g. 5 years?
A combination of the above or something I've missed?

What would/did you advise your child if they were in her position?

Pension is the other thing to look at. Disadvantage is that it locks away the money, advantage is that it gets tax relief added. Even if she has no earned income, she can put in £2880 to a pension, each tax year. That becomes £3600 when the tax relief is added.

Lifetime ISA as you already know is an option, can put £4k per financial year in to that. It gets a 25% topup (just like the pension!) but it can be accessed earlier than pension as it can be used towards a first home purchase (though note there is an upper value limit). Downside is that if it is withdrawn for any other reason, there is a penalty. If £4k is put in, £1k of topup is added, then £5k is withdrawn... penalty is £1250, so only get £3750, not £4k back.
Lifetime ISA can be in Stocks & Shares, so can grow over a long period of time.

It is possible to lose money on an investment with a time horizon of 5 years, or less. It is possible to lose longer term but less likely as generally the markets go up over time. It's a rollercoaster though, lots of ups and downs. This affects Pension, S&S Lifetime ISA, S&S ISA.

Interest rates on cash savings (Cash ISA, Personal savings account, fixed rate bonds, that sort of thing) are terrible, often under 1%. Advantage though is accessibility, many are instant access, some are With Notice (30-120 days).

Perhaps doing a mixture of things is better than doing just one.

If she doesn't want a lifetime ISA then stocks and shares is a solid and sensible choice, but something like Vanguard lifestrategy 80 and not touching it for 5+ years. There will be dips but long term it is a sensible choice (always baffles me when people say they're scared to invest but then do so via a company pension?!)

There are also savings accounts that offer slightly higher interest rates (still pitiful, but slightly better) if you lock away for 2, 3 or more years. That has the advantage of protecting her from the temptation of a blow out at a weak moment.

If she is even remotely interested in money and accumulating it I'd encourage her to join UKpersonalfinance Reddit or look up YouTubers like mamafurfur.