What would you do with £120,000 at 18?

[Melonportal]

My 18 year old brother has just inherited £120,000 in very sad circumstances. He's quite young and vulnerable for his age and has no real interest in the money - he's said he'll do whatever I tell him with it.

So, any ideas? I'm concerned about him having easy access to large sums in case someone takes advantage of him. What would you do?

In his shoes buy a tiny house outright, let it out via a letting agent and continue to live with parents.

I don't think the property option is the best thing for an 18 year old living at home. I think something like a fixed rate bond would work better as it would ensure the money isn't easily accessible and would be there if he wants to do a further degree/qualification etc.

Invest it in something that he can’t access for a little while. But keep enough back that he has money for drivIng lessons etc.

Honestly if he’s not coping, probably best to get it out of the picture until he is ready to face it

Stick 100k in a fixed rate bond for three years until he is 21, review at that point, where he might want to buy a home for himself or lock it away for another three years.

Take 4k start a LISA that he can be adding to himself once his apprenticeship is done. Also towards his first house purchase.

5k for a car. 5k for some travelling after apprenticeship.

6k aside in easy access for emergencies.

Agree with pp's. Don't do anything yet. Put it safely. Suggest he keeps £100k for house, 2 x accounts of £10k, one to be spent carefully, one to spend on say a holiday, a new laptop etc.

If he's working, even on an apprentice wage, and living with parents, he has a decent amount of spending money so doesn't really need access to lump sums unless he needs to buy a vehicle or invest in a business so he can afford to lock the money away, most of it at least.

With higher interest rates, and the trend away from BTL, it's unlikely that he'll miss out on easy money by not buying a house to rent out. However if his apprenticeship is in a trade, he could use the money to start a property development business, buying doer uppers, refurbishing them and renting them out, using an agency if necessary (and being a caring responsible landlord that even MN might approve of ). However that needs a degree of drive and focus to do that successfully.

If he's no real idea, he could keep back about £10k in cash and the rest put in a mix of short and long term products. Anything in cash will attract tax on the interest so it's good to be aware of that.

Unless he's really keen on the BTL or even buying his own property, so would want the money for that, he could put some of it into his pension (I think he'll be limited to 100% of wages) so that could take up around £13k per tax year - at this time of year it's always worth bearing in mind that you can 'double up' on allowances by putting the full allowance in now and the same again after 6 April next year. Same for his ISA allowance, cash for any money he might want to use in the next few years, at the moment, that guarantees a few % a year return, which can't be said for S&S ISAs, although these could be an option if he's no real idea what to do with the money in the next few years.

For cash savings, 1/2/3 year fixed products will mean he'll get a slightly better return and make it a bit harder to access the money. Seeing as he needs to use options that aren't taxable (although he has a £1000 tax free allowance on interest) Premium Bonds might be worth a look at - if he puts in the full allowance or a decent fraction of it, his payout should average close to the stated prize fund percentage.

With that amount of money at his disposal, he might as well open a LISA and put the full allowance in each year (£4k I think?) which he'll earn an annual bonus on, but the money that goes on here can only be used towards property or as a pension.

Anything that's not going into any of the above options can go into a decent paying instant access account so it earns a bit of interest, 5% is widely available.

I am not a financial advisor but my common sense and love of home ownership prompts meto say ...

Invest in property and rent it out to help pay it off.

Research where is the best location and buy a house that needs little upkeep.

The money might not be able to purchase the same value of house if he stays with cash in the bank for a number of years.

In ten years time he will have choices of selling, upgrading, taking out a loan against the house etc.

Seek proper financial advice.

This is good advice. I would only not invest in a property unless he can afford the upkeep and maintenance. All he needs is feral tenants he can't get rid of and it could be a disaster, so for that reason I'd stay away from a property in the first instance and invest in a low risk fund

Go through the UK personal finance flowchart.
meaningfulmoney.tv/OS1 is start of a podcast series about the flowchart.

Most of he money gets parked... put somewhere safe. Avoid making quick decisions, especially if the circumstances involve death of a close relative. Grief situations can be bad for making good decisions.

Use allowances. ISA, LISA, Pension. Within the next 6 months, £40k could be parked in ISA/LISA as half can be done prior to 5th April and then repeated on 6th April. Remainder can sit in an interest paying savings account.

If they have any debt, then repaying that would be a good thing to do, as long as they learn not to use consumer debt again.

£20k into an ISA invested in global equity tracker. Same in the new tax year.
£20k in easy access savings at 5% interest
Remainder invested in individual UK Gilts (look for the ones with low "coupon" rates). In a taxable account, only the interest is s.t. tax but the gains are exempt from capital gains tax, so your post-tax return will be higher than putting the whole whack in a savings account and paying tax on the interest.

Revisit each year, topping up savings and moving money from the bond account to the equity account using ISA allowance if he is unlikely to need that chunk of money for 5+ years.

Agree with pp that a house may not be the best idea at the moment because he doesn’t have a slush fund to fix any big things and also because there are expenses associated with the purchase that will eat into the money. Also it could just get stressful if he gets a bad tenant and had to evict. A fixed rate one or two year bond might give him a good enough rate to mitigate inflation.

A reasonably priced car could be helpful for him and driving lessons if he doesn’t already drive.

Spend a year travelling the world. That will help him grow up a bit and give him the experiences he needs not to be 'vulnerable' anymore.
Spend £30 on university. The rest should be saved for a deposit.

No,no,no! Becoming a landlord when he's barely an adult would be a terrible move. Absolutely not.

Invest most of it and have a pissing it away fund of £10-15k so he can do what he wants and have fun

I’d put £20k in an ISA for now, then in April open another ISA for the other £20k. Then £80k in a savings account with good rate or invest it in shares but only if that suits his risk appetite etc. I think I’d be too scared to.
Longer term I’d use it as a house deposit only when he’s ready to buy though.

At 18 I'd do absolutely nothing. Tell him to stick it in a high interest account / bond whatever and ignore it until he's 25 or so.

He can then buy a house, hopefully he adds to it from his own wages, he'll be sorted for life.

@marshmallowfinder - why a terrible idea? Next post I said to run it through an agency so he doesn’t have to do anything. He’ll make less from his investment that way, but it makes it low effort.

he lives in an area where £100k could buy a house outright and the assumption is at some point he’ll buy a property with it when he’s ready to leave home. Why not start with the house and rent it out until he’s ready to leave home? (Better than invest it in a way that takes £100k to £150k over a decade, only to find in 10 years time those small houses have gone from £100k - £200k and now he can’t buy without a mortgage.)

Have a good look at the LISA rules for buying a house, and if you think they apply put 4K into that each tax year. Use up the rest of your ISA allowance (16 or 20k) depending on the LIZA. Find a stocks and shares isa for those. Then invest most of the rest either in a high interest account or more stocks and shares. If he is going to be a student, work out a budget to support that and put that in an easy access high interest account.. The premium bonds average return is quite low so maybe not those.

@Melonportal a point to note is the maximum you can put with one financial institution under the FSCS scheme is £85k. https://www.fscs.org.uk/ An exception is NS&I.

I would advise:

• £4k in a LISA https://www.moneysavingexpert.com/savings/lifetime-isas/
• Each year drip feed in a further £4k.
• £20k into a fixed term ISA
• Each year consider adding £20k to ISAs.

Note: ISA interest can be less than a standard account but interest on an ISA is tax free whereas on a savings account only the first £1k is tax free.

The remainder lock away in fixed term accounts - possibly with variable terms so you can drip feed into ISAs.

I would recommend MoneySavingExpert as a good source for current interest rates. https://www.moneysavingexpert.com/savings/

Give your brother time and then slowly start to help him learn about finances, savings, mortgage, pensions etc. At 18 locking it away until he is ready to purchase a home makes the best sense.

Put it in bonds and not touch it until he is able to do something constructive with it like get a house or start a business if he has any interests in things like that.
As you said the money came about due to a sad circumstance I would get him to spend some of it on self care like a counsellor to have someone impartial to talk through his feelings.

If he is unlikely to cope living away from home atm he is unlikely to want to put up with the hassle of renting out a property even if it is managed by an EA.

I would look at the high interest savings accounts on MSE and spread it across :

1. The highest paying ISA
2. The highest paying ‘easy access’ account, and on April 6 transfer another £20k into the highest paying ISA
3. Another high interest account, maybe fixed for a while.
4. £3k in his bank account

Review at 21 / when he finishes his apprenticeship/ when he feels he would like to move.

Look at the accounts with him regularly, let him see how the money grows, get him to read MSE and increase his financial knowledge and confidence.

Depends what kind of apprenticeship and what he would really like to do. It would also depend who left it to him and what they would want.

I’d certainly get him driving and his own modest vehicle if he doesn’t have one already.

50 in Premium Bonds
20 this year and another 20 next tax year, some in shares.

No to property,. Apart from the hassle, there is also a tax return to do and it's not easy to cash in if he ever needs money.

Worth considering what might be his longer term options, would he ever be able to )live independently?

Meant 20k in ISA this and next year

The rest in easy access savings a/c

There’s brill financial advice on here about ISAs, bonds etc and that’s what I’d advise my DS18 or his mates (neurotypical, non-vulnerable) to do….but that doesn’t help with the issue of the OP’s brother’s vulnerability to gold digging fairweather friends and girlfriends. As a few pp said, it would be easy for that money to deplete very quickly.

I dunno….I think I like the house option for him, particularly if his apprenticeship is in a trade and he can enjoy working on it/project managing in his spare time, assuming he’s emotionally up to it.

So, I’d say £100k into a small house that’s a bit shabby, £5k into a rainy day savings account paying 5%, £5k for decorating etc, and £5k fun money.

But you know your brother best, OP.