20 Year old, 200k inheritance, investment choices
Discussion
Neice is gettinga little more than 200k from grandparents... I've not been in the UK for a decade to keep track on financial landscape and brother doesn't really follow financial planning.
She is terrible with money, but would like to guide her at least in the right direction.
At such a young age I would suggest 120K into the S&P, 50k into high interest savings/bond account for house deposit and 30K so she has something to blow...
But from the start:
what are the best (lowest annual management fee brokers) - Vanguard?
How much can be put into an ISA which assume are still around and will that work with like vanguard?
Is there a UK equivalent of IBonds where cash can be put into bonds for the higher interest rate with no tax penalties?
TIA
She is terrible with money, but would like to guide her at least in the right direction.
At such a young age I would suggest 120K into the S&P, 50k into high interest savings/bond account for house deposit and 30K so she has something to blow...
But from the start:
what are the best (lowest annual management fee brokers) - Vanguard?
How much can be put into an ISA which assume are still around and will that work with like vanguard?
Is there a UK equivalent of IBonds where cash can be put into bonds for the higher interest rate with no tax penalties?
TIA
Using LISA allowances this FY and next, so by April, she could stick away £8k in a cash LISA and benefit from the government bonus and use this when buying a house in the near term.
If shes a liability with money then wouldn’t it make sense to use the money to secure her future now by putting as much, if not all, towards a home for her? Cash in bank or in accessible investing accounts could end in tears. Unless all SIPP’d up of course.
FWIW, I’d think broader than just S&P500 if investing anything. There are also cheaper platforms than Vanguard if going ISA route, iWeb to name one.
If shes a liability with money then wouldn’t it make sense to use the money to secure her future now by putting as much, if not all, towards a home for her? Cash in bank or in accessible investing accounts could end in tears. Unless all SIPP’d up of course.
FWIW, I’d think broader than just S&P500 if investing anything. There are also cheaper platforms than Vanguard if going ISA route, iWeb to name one.
£20k into an ISA before April & £20k after gets £40k of it earning tax-free. Shove some into a SIPP, the amount depends on what she earns or already contributes, again before & after April. She will still have some left over so stick some into a GIA invested in funds (need choose which ones though) via Vanguard, AJ Bell or Interactive Investor. Leave £10k for her to spend/waste.
If she's terrible with money then use all of it as a house deposit, one that needs very little maintenance or upkepp beyuond decorating i.e. not some Victorian property but a newish build (maybe keep £10k for furniture etc).
If she doesn't need a house now, then buy one and rent it out til she does need one.
Combine it with other schemes to maximise value:
https://www.zoopla.co.uk/discover/buying/which-fir...
If she doesn't need a house now, then buy one and rent it out til she does need one.
Combine it with other schemes to maximise value:
https://www.zoopla.co.uk/discover/buying/which-fir...
Mr Overheads said:
If she's terrible with money then use all of it as a house deposit, one that needs very little maintenance or upkepp beyuond decorating i.e. not some Victorian property but a newish build (maybe keep £10k for furniture etc).
If she doesn't need a house now, then buy one and rent it out til she does need one.
Combine it with other schemes to maximise value:
https://www.zoopla.co.uk/discover/buying/which-fir...
I’d say house too. All you need is say a 5% market drop and all she will see is £1,000s lost and bale on the lot and end up wasting it.If she doesn't need a house now, then buy one and rent it out til she does need one.
Combine it with other schemes to maximise value:
https://www.zoopla.co.uk/discover/buying/which-fir...
Unless you can also educate her about holding shares.
Brother D said:
Neice is gettinga little more than 200k from grandparents... I've not been in the UK for a decade to keep track on financial landscape and brother doesn't really follow financial planning.
She is terrible with money, but would like to guide her at least in the right direction.
At such a young age I would suggest 120K into the S&P, 50k into high interest savings/bond account for house deposit and 30K so she has something to blow...
But from the start:
what are the best (lowest annual management fee brokers) - Vanguard?
How much can be put into an ISA which assume are still around and will that work with like vanguard?
Is there a UK equivalent of IBonds where cash can be put into bonds for the higher interest rate with no tax penalties?
TIA
Isn't is more relevant to consider her circumstances and what she might want to do with life than what has the best fees?She is terrible with money, but would like to guide her at least in the right direction.
At such a young age I would suggest 120K into the S&P, 50k into high interest savings/bond account for house deposit and 30K so she has something to blow...
But from the start:
what are the best (lowest annual management fee brokers) - Vanguard?
How much can be put into an ISA which assume are still around and will that work with like vanguard?
Is there a UK equivalent of IBonds where cash can be put into bonds for the higher interest rate with no tax penalties?
TIA
Big difference between someone already at Uni lining up for a high paying career, where the money might be very helpful, vs someone who might have a different outlook and for whom buying a house might be the better move...?
LooneyTunes said:
Brother D said:
Neice is gettinga little more than 200k from grandparents... I've not been in the UK for a decade to keep track on financial landscape and brother doesn't really follow financial planning.
She is terrible with money, but would like to guide her at least in the right direction.
At such a young age I would suggest 120K into the S&P, 50k into high interest savings/bond account for house deposit and 30K so she has something to blow...
But from the start:
what are the best (lowest annual management fee brokers) - Vanguard?
How much can be put into an ISA which assume are still around and will that work with like vanguard?
Is there a UK equivalent of IBonds where cash can be put into bonds for the higher interest rate with no tax penalties?
TIA
Isn't is more relevant to consider her circumstances and what she might want to do with life than what has the best fees?She is terrible with money, but would like to guide her at least in the right direction.
At such a young age I would suggest 120K into the S&P, 50k into high interest savings/bond account for house deposit and 30K so she has something to blow...
But from the start:
what are the best (lowest annual management fee brokers) - Vanguard?
How much can be put into an ISA which assume are still around and will that work with like vanguard?
Is there a UK equivalent of IBonds where cash can be put into bonds for the higher interest rate with no tax penalties?
TIA
Big difference between someone already at Uni lining up for a high paying career, where the money might be very helpful, vs someone who might have a different outlook and for whom buying a house might be the better move...?
To put it politely, she's not lining up for a high paying career.
She will be given a mortgage-free house in the not too distant future, but it's a good point if she wants to buy a house to rent as her 1st house, however the issue I can see with buying a rental property is that over the long term equities far outstrip house values and it's far less hassle than having to deal with bills, tennants and eveything else (and there is the liquidity aspect).
What I would hope she wants to achieve is having a growing nest-egg for the future...
I definitely wasn’t suggesting buying a rental! In fact I think it would be a bad idea.
Was more thinking along the lines that for some people, simply having a house to live in, mortgage free from the outset, would give tremendous stability and a degree of capital protection. It sounds like she’s in the fortunate position of being able to have this in the future though.
One of my close friends came into a decent sum of money around that age and it’s fraught with pitfalls.
Some to “blow” can set up bad spending habits, especially if it gets blown on things with friends. Some “friends” will be keen to see that gravy train of generosity continue… ideas like “a nice holiday” and “a piece of jewellery to remember granny” give a bit of hedonism but without establishing negative spending patterns or attracting too much attention from others. I know it’s PH but avoid steering towards a nice car otherwise you’re potentially accidentally putting her on a treadmill that could see the lot consumed quite quickly…
The problem with a “nest egg” that someone knows is growing and/or there for the taking is that they know it’s there and can be accessed if they want (or consciously/sub-consciously borrowed against). You don’t want it accessed in ways that see it frittered away, but equally what’s the point of it being there if it is seen as untouchable?
Personally, and I know views will differ on this, I’d be trying to focus on a strategy that deliver an element of income so that she feels the ongoing benefit of that money instead of being tempted to access the capital too often/frivolously. There are various income bond products (NS&I for example, also 100% protected) so one of those plus a couple of market based products to see growth might be good mix? Balance it every few years so that some of the growth gets shifted to the income product?
Was more thinking along the lines that for some people, simply having a house to live in, mortgage free from the outset, would give tremendous stability and a degree of capital protection. It sounds like she’s in the fortunate position of being able to have this in the future though.
One of my close friends came into a decent sum of money around that age and it’s fraught with pitfalls.
Some to “blow” can set up bad spending habits, especially if it gets blown on things with friends. Some “friends” will be keen to see that gravy train of generosity continue… ideas like “a nice holiday” and “a piece of jewellery to remember granny” give a bit of hedonism but without establishing negative spending patterns or attracting too much attention from others. I know it’s PH but avoid steering towards a nice car otherwise you’re potentially accidentally putting her on a treadmill that could see the lot consumed quite quickly…
The problem with a “nest egg” that someone knows is growing and/or there for the taking is that they know it’s there and can be accessed if they want (or consciously/sub-consciously borrowed against). You don’t want it accessed in ways that see it frittered away, but equally what’s the point of it being there if it is seen as untouchable?
Personally, and I know views will differ on this, I’d be trying to focus on a strategy that deliver an element of income so that she feels the ongoing benefit of that money instead of being tempted to access the capital too often/frivolously. There are various income bond products (NS&I for example, also 100% protected) so one of those plus a couple of market based products to see growth might be good mix? Balance it every few years so that some of the growth gets shifted to the income product?
Ultimately (and unfortunately) it's her money and if she wants to blow the lot then I'm guessing there isn't a lot you can do about it?
I hope you succeed though as it sounds like you very much have her best interests at heart.
Could a large portion of it be 'locked away' into something, and maybe just give her £10K or something to fritter away? Hopefully it she gets the rest when she's a bit older she'll appreciate it more.
I hope you succeed though as it sounds like you very much have her best interests at heart.
Could a large portion of it be 'locked away' into something, and maybe just give her £10K or something to fritter away? Hopefully it she gets the rest when she's a bit older she'll appreciate it more.
colin79666 said:
I’d put 25% in premium bonds unless it’s getting used to buy a house. Also make full use of an ISA this tax year and drop another 20k in next. No point letting the government rob her twice on the same money (assuming this was subject to inheritance tax).
Meh - mum had premium bonds for like 60 years and the apr was like 2% If that. Gilts are like 4.5% which was reason asking if the UK has an equivalent of USA I-Bonds which is a tax-free vehicle. Brother D said:
Neice is gettinga little more than 200k from grandparents... I've not been in the UK for a decade to keep track on financial landscape and brother doesn't really follow financial planning.... She is terrible with money
I would kiss it goodbye frankly; no way is anyone terrible with money going to do any more than buy a new car, have a holiday and if you're lucky, put the rest in a building society.Most people know nothing about SIPPS etc. They just think they have to work to 70 then get an OAP.
I'm not going to offer any opinions on the investments aspect etc, but I do think spending 5-10% of the money on something really nice for herself is ok to do. It's not about "blowing it", just if there were something like a trip to Australia or similar that's always been on the radar but she'd otherwise not get the opportunity to do until much later in life, it's an opportunity to do that.
Simpo Two said:
Brother D said:
Neice is gettinga little more than 200k from grandparents... I've not been in the UK for a decade to keep track on financial landscape and brother doesn't really follow financial planning.... She is terrible with money
I would kiss it goodbye frankly; no way is anyone terrible with money going to do any more than buy a new car, have a holiday and if you're lucky, put the rest in a building society.Most people know nothing about SIPPS etc. They just think they have to work to 70 then get an OAP.
If had invested 100GBP each month from when I was 20 I could probably be retired already. Having this massive initial lump sum is a huge safety net, and don't want to see it frittered away... It could be a bit of a struggle to convince...
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