Investment ideas

[Nepotism]

My 28 year old has just inherited around £100,000. She is unlikely to be in a position to buy a house for many years and has a low and irregular income due to mental health issues.

She has history for making some very unwise financial decisions and I'd like to steer her towards something sensible. Any suggestions?

You don’t say what her situation currently is (whether she’s working, has a pension etc), but I’d probably look to diversify the £100k across a few different accounts.

You say she’s unlikely to be in a position to buy a house soon, but if you think she will at some point, it may be worth opening a LISA.

She could also perhaps max out an ISA with a good interest rate, and maybe put a chunk into a stocks and shares ISA with a platform like Vanguard - this will accumulate over the years to build into a really good amount of money for retirement etc.

Thanks. She's in a minimum wage job and has frequent periods of unemployment because of her mental health.

I'll have a look at ISAs and savings accounts

I would advise to buy a buy to let property in her name, if possible (might not be due to income) or both your names. and then use the rental income to pay off the mortgage, when she is ready to move out she will have somewhere to live.

Put some into a pension. It cannot get frittered away and should compound nicely by her retirement.

She is unlikely to be in a position to buy a house for many years and has a low and irregular income due to mental health issues

mental health issues don't go away. if "not in a position to buy" was due to career status meaning someone needed to be free and flexible where they live, then a long term investment product would be right. however, what this young woman needs is stability now. she's not going to be in any better a position in 20 years time and the anount lost in rent will far outstrip any investment gains.

I think looking into buying a shared ownership property asap would be sensible, finding a property that is modest enough to manage on her low income. social housing shared ownership schemes have a variety of different criteria so look at all the different organisations in your area to see which she would qualify for.

actually, before writing the above, I should have checked - is she in fact renting independently or is she still living with you?

if she's living with you and not able to live independently yet then @aluvss's advice is better. getting a small property now that she can eventually move into, and focusing on giving her the life skills so that she can move out before old age catches up with you.

Somewhere like Vanguard, 20k each in 5 different investment funds, a couple of local and 3 international (eg shares, infrastructure). Set it to reinvest the dividends and when she is ready to buy something the portfolio will likely have gone up in value and she will also have the increase through the dividend reinvestment.

Thanks. No, not living with me, renting privately.

Unfortunately because I already own a house it would count as a second home for stamp duty. I'm retired so not able to get a mortgage.

I'll look into Vanguard

@Nepotism @LawksaMercyMissus

it might be an idea to ask MN to put all your posts under one name to show as the OP.

if DD is living independently and renting, why do you feel buying her own place is years away? Obviously we don't have many details, but buying a small place & paying a smaller mortgage than rent would give her some stability as well as being able to 'make it her own' etc.

In that case I think it's much more sensible for her to use the money to avhieve a long-term housing situation. Ideally via shared ownership but if that wouldn't work then looking into the below idea. Nothing you can invest in will outperform being released from paying rent, and there's no "in a few years time" prospect of her situation improving that it's worth waiting for, unless you think there's likely to be another major death/inheritance within the family within the next 5 years or so.

tbh I am quite likely to be in a similar situation myself one day. DC is currently a teenager, and with a number of neurodiversity issues such that I am not entirely confident of their ability to hold down well-compensated employment long-term, and given the ages of the remaining grandparents there could well be a lump sum of this kind of scale when DC is mid-to-late-20s.

I think what I would be doing, if DC agreed, would be making a plan to combine this with my own retirement downsizing - selling the family home and looking to buy a property outright which is divided into an upstairs and downstairs flat which would be co-owned with the DC and bought mortgage-free - they putting in their inheritance money and me the capital from the large home. We'd each live independently but be nearby for emergencies, and then when I shuffle off this mortal coil it's nice and easy for my flat to become a source of rental income for DC to provide further income for their rest of their life.

What would 100k buy in your area? It sounds like your DD could benefit from stability, and if she’s likely to remain in a low paying job, then low or no housing payments and a property of her own would presumably be very helpful for her? That’s assuming she could finance the shortfall of course.

Otherwise yes she can put 20k in a S&S isa that can grow tax free and up to her annual income usually into a pension each year.

I'm not in the UK and she is in London sharing a flat with a sibling. Financially it would make sense for her to leave but she needs and gets a lot of support from them.

My family is very spread out and the two she is closest to both live in hideously expensive tourist areas with most employment being low paid care or catering work.

I hope I don't sound like I'm putting up obstacles. Ideally I'd like her to buy somewhere but she's only on about 20k and has had long periods of unemployment which would raise concerns with any lender.

It's probably ten years till the next death, I just need to make sure she doesn't fritter it away before then!

Thanks for all your suggestions.

I would strongly suggest avoiding shared ownership. You’re really restricted as to who you can sell it too and they don’t normally represent very good value. You still need to pay rent on the part you don’t own. I would diversify as someone said upthread. She’s young so should stick it into a high risk stocks and shares ISA through Vanguard. I do it online and have put it into the US markets. The key thing is the fee - the lower the better. You can only invest 20k a year tax free so you can do 20k now and another 20k in the next tax year which starts in just a couple of weeks (though probably better off making regular payments than in one hit due to market volatility). Also sticking some in a pension is also a good idea. Basically anything the government can’t get their hands on!

Before you start thinking about investing too widely, looking at shares etc etc I think that you need to be really honest with yourself about what your daughter can manage by herself.

Given that she’s in her 20s investing in anything which she doesn’t understand or needs regular form filling / organising / buying and selling shares /calculating capital gains etc might be too hard for her to manage long term if she has times when she can’t work.

If you think that there is a genuine risk of her blowing the money then pension, at least for some of it, would be a safe and sensible choice.