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Student Savings

12 replies

Tomorrowwillbefun · 12/12/2023 19:22

My DS19 has £10000 he’s inherited. He wants to invest it and doesn’t want to party it away during his university days. Any advice? My brain 🤯 has exploded looking!

OP posts:
Squiggles23 · 12/12/2023 19:39

I would put it in a cash isa as rates are so good at the moment.

You could invest it but you would need to beat 5% just to beat your isa rates so it’s not hugely worth the risk.

ItsReallyOnlyMe · 12/12/2023 19:39

Put £4K in a Lisa if he doesn't already have one.

Then put £6K in a fixed rate bond for 3 years or more.

Iwishiwasasilentnight · 12/12/2023 19:42

How long does he wand to save for? A LISA is a good idea if he wants to save for a property/retirement.

Tomorrowwillbefun · 12/12/2023 21:52

I think his time plan isn’t set in stone. Eventually he wants his own house but he also wants to travel. So could need the money for a gap year after university.

OP posts:
seekingasimplelife · 13/12/2023 10:02

An exciting challenge for your son!

I would assume he wants to keep relatively easy access to funds, and also to maximise growth of the pot with very little risk - at least until he has completed his studies and has some firm plans in place for the future.
It's a great opportunity to learn about savings and investments.

Depending on how much time and effort he is willing to devote...I would do the following (I'm not a financial adviser, so he must do his own research):

Split the money into five lots of £2K as follows:

1a. First £2K pot put £1,000 in an easy-access (or where access limited to a couple of times a year) emergency savings fund.

1b. For the remaining £1,000 of this first pot, open a dummy second current account and utilise bank switching offers and regular saver high interest accounts such as Nationwide 8% regular saver account, Skipton 7.5%; First Direct 7%. The regular saver accounts have limited deposit rules for each month but he could use several and set up standing orders to automate the process.

The bank switching offers are likely to earn more than the interest from a savings account - (I've made over £400 this year from this strategy with minimal input and a small amount of capital). Having a second account is also a wise back up financial strategy in any case. The CashChats podcast is a good source of information on these deals as well as MSE.

  1. For the second, third and fourth pots of £2,000, I would build a savings ladder of three fixed-rate accounts - maturing in 1-year, 2-year and 3-year, of £2K each, so every year another pot becomes accessible and can be reallocated into a new account depending on his circumstances.
Unless your son is likely to exceed his personal savings allowance, I would not use an ISA at this stage as rates tend to be lower. Savings Champion is a good website for finding best rates.
  1. For the fifth pot of £2,000, wait until the new financial year in April.
Look for offers on investment accounts - sweeteners that investment companies use to attract new business. These can be quite lucrative for smaller investments over a few different providers (one offer will boost my small investment by 100% after a year, so I know there was no risk to the capital return). There is always a risk of stocks and shares investments losing capital, but it is a good way to learn about investments as opposed to savings, and will help him develop an idea of his own risk profile. After a year he can choose to take the bonus and decide on how he wants to proceed - either keep the investments ongoing or move to another bonus offer, or opt for a longer term investment option. This is not a strategy I would use for long term investments such as a LISA or pension, but it is a good way to learn about S&S investments and make use of the bonus offers on smaller amounts of capital to reduce any risk. If he doesn't want or need to use the full £2K for this, or if there are not sufficient sweeteners in April to make it worthwhile, he could add another account to his savings ladder with a 4 or 5-year fixed-rate account.

This strategy will hopefully encourage your son to monitor his accounts at least once a year, and maximise his return on a regular basis in the shorter term. When he is further along on his stage of life and ready to make plans with longer term investments, he can reassess.

NoSquirrels · 13/12/2023 12:42

Tomorrowwillbefun · 12/12/2023 21:52

I think his time plan isn’t set in stone. Eventually he wants his own house but he also wants to travel. So could need the money for a gap year after university.

£4K into a LISA now. £4K into a LISA in April. (House deposit ‘eventually’)

Remaining £2K into a high interest savings account. (Travelling fund).

(Working on an 80/20 rule of being sensible Vs having fun!)

Squiggles23 · 13/12/2023 14:01

The problem with the LISA is the £450,000 limit hasn’t been increased since 2017. If he wants to buy in more expensive areas (like London) it really does create a problem as many first time purchases end up being above that.

I know lots of people whose house searches have been limited as a result or who have ended up having to take it out. It might be better to have something more flexible.

Jandob · 13/12/2023 14:16

Get proper advice as could be tax issues too.

seekingasimplelife · 13/12/2023 17:59

Jandob · 13/12/2023 14:16

Get proper advice as could be tax issues too.

Tax issues? For a student with £10K savings?
Paying for 'proper advice' would be counterproductive - a large portion of the capital would be eroded by the fees.

MikeRafone · 13/12/2023 19:30

is your ds working at all?

If he is not working then he could invest the money in a high interest account as the tax implications aren't a concern - but if he is working then looking at an ISA may well be a much better bet

Tomorrowwillbefun · 13/12/2023 21:39

Thank you for all the advice. I have copied and pasted it into an email. He can do some research during the Christmas holiday. He has been given a fantastic starting point from all of the replies. Thank you for taking the time.

He doesn’t have a PT job … yet!

OP posts:
MikeRafone · 14/12/2023 08:18

He doesn’t have a PT job … yet!

the tax on interest from savings is payable in the tax year that the interest was paid. This is worth bearing in mind if you opt for monthly interest payments

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