Where to put 18-y-o DC savings?

[theministerscat]

Hello - hoping for some savings-savvy advice please. We have been saving for one of the DC in a Child Trust Fund since they were wee and they need to move it in a few weeks when they turn 18. It’s around £24k. I’m trying to work out the best/safest account to go for. Don’t want to use a LISA as not sure they would need it for a house deposit. Am wondering about a cash ISA for £20k and then £4k in a savings account in case they want to buy a car or travel or something? Or should they put the whole lot (or £20k as above) in a high-interest account? I’d ideally like it sort of locked away for a bit and they seem to be on the same page around that idea. Any advice much appreciated. Thanks.

DD is 18 next year, so will get control of her CTF and savings, around £6K in total. I will be advising her to put it in the highest interest account she can find for instant access, as she may need some of it to get her through 3 years of Uni.

If your DC doesn't need access to it, then I would lock away £20K in a notice account/high interest and put the rest into instant access.

Yorkshire Building Society usually have some good rates, although there are a few places that are a bit higher.

As an accountant, I am not licenced to give financial advice, but personally I always go for the highest rates from the best known society, that I can open and deal with online.

@skyeisthelimitThanks very much, that’s helpful. I’m looking at MSE now and feeling conflicted because it looks like easy access accounts are currently paying a higher rate of interest but I’d rather they didn’t have easy access to all that hard-earned money! Hmmm.

The easy access accounts that offer better rates will probably be limited to £5,000. Most savings bonds and ISA’s are fixed for a minimum period of a year, so you need to think about that, but unfortunately the only way to earn reasonable interest is to put money into one of these. There is talk about changes in the budget to the ISA amount of £20,000 per year being lowered.

I’d put a lump in high interest, fixed rate account you cannot touch. Doesn’t have to be the whole amount.

Any particular reason why you won’t consider stocks and shares? Even in a “high interest” account the growth will be eaten away by inflation if kept in cash.

Take a look at Rebel Finance School and encourage your DC to do the same, learning about the benefits of compounding and investing in global index funds is a lesson well worth taking.

https://rebeldonegans.com/finance/rfs/

You should be able to just transfer the whole amount to an adult ISA. It won't count against his ISA limit for the tax year, and will keep it all in the tax-free wrapper until you decide what to do with it longer term.

It's legally their money, so it doesn't matter how hard earned it was, they are the one to choose what access they have. What are they planning on saving for? If it is something soon, like uni, I would put 20 in a cash isa and the rest in a savings account, to be moved across to an isa in April. If it is longer, definitely consider stocks and shares isa's.

You will generally get a highly interest rate outside of an isa, as there is less to administer, but you need to pay tax on interest over 1k. If in stocks and shares, there is also capital gains to consider unless in an isa or pension.

If you looking at long term Fidelity stocks and Shares ISA, good selection of funds you can use online tools to default a fund choice based on risks, relatively low fees. Personally I wouldn’t discount the LISA the government top up 1k per 4K per year is really good.

It's not your money to decide though. If its in a child trust fund then as soon as they hit 18 it is nothing to do with you. They can take the whole lot and put it on the horses if they so wish. In fact they have the legal right to manage it themselves from the age of 16. They just cant withdraw until 18.

It's not up to you. It's their money.

Thanks to all who have offered helpful suggestions. Just to say that the DC is keen to put it somewhere safe for a while so is on board with all of this. Cheers.

We had already transferred ours into junior ISA accounts so when they matured they turned into adult ISA accounts without affecting the annual allowance. Assume it would be the same for CTF but the provider should tell you.

If they need the money in the next few years.e.g. to help fund university or buy a car then cash is best. If they won't need it all then putting some in a LISA isn't a bad idea because of the bonus. Shares are good longer term, 5-10+ years, but ideally you need to be flexible with the end date to avoid needing the money the day after a stock market crash.

Natwest has a 4.2% 1 year fixed rate ISA, so above B of E's base rate. The higher interest accounts tend to only have a low amount you can put in and/or you have to put it in month by month rather than as a lump sum.

I think 20k in savings and 4k available is a good split.