We know that getting on the property ladder isn’t easy; house prices are rising, mortgages seem impossible to get, and well, who has the money these days?!
Saving money has always been difficult for some people – those who cannot resist a good shopping spree or that holiday that was so “needed”. But with some of the new savings options out there now, it’s very tempting to put a decent amount away each money.
This article recommends 2 of our favourite types of ISAs where you can maximise your savings and even get some amazing perks in return:
One of the newer ISAs out there, but one of our favourites! If you don’t know about it, then read carefully and apply right away!
The Lifetime ISA is available for anyone between 18 and 40 years old, although you can keep depositing into it until you’re 50. You can deposit a maximum of £4000 a year, but then the government gives you a 25% bonus! This is completely free money!
You will stop receiving the bonus at the age of 50, but you will continue to earn interest on your savings. You can only withdraw the money in three circumstances:
- You are buying your first home
- You are over 60 years old
- You are terminally ill and have less than 12 months to live
You can withdraw your money for another reason, but with a 25% penalty on your savings. This means you will receive less money back than you initially put in!
However, if you’re saving for your first home, this is a fantastic ISA to go for. If you save money for 5 years, you will find your initial £20,000 savings in there, plus a free £5000 from the government!
This is another ISA that is backed by the government, and you also receive a bonus with this one. This ISA is available for anyone 16 or over who doesn’t already own a home. So, if you’re 16 or 17, this is perfect for you, as you’re not yet eligible for the LISA.
The government also give you a 25% bonus with this ISA, but you can only deposit a maximum of £200 per month. However, in your very first month, you can save a maximum of £1000. You can receive a maximum of £3000 as a bonus from the government, which means you will have deposited £12,000 into your account, which will take you just under 5 years if you deposit the maximum in your account each time.
The two ISAs we recommend above are two of the safest ways of investing money. You’re guaranteed to retain your savings and make a profit from the 25% bonus plusany interest earned. These ISAs are no-brainers to open if you’re saving for your first home.
There are a couple of other ISAs to consider:
- Investment ISAs, which allow you to invest in more than just stocks & shares. They often yield a lot more return than cash ISAs, but there’s also some risk involved as the value of whatever you’re investing in can also go down.
- Innovative Finance ISAs, which are the newest and riskiest of them all. This is peer-to-peer lending, and you’re investing directly in other people’s businesses. You can get a lot more interest on your investment, but there’s also a chance these businesses could go bust, and you could lose your money.
We will touch on these ISAs in a bit more detail another time, but the reason we recommend the above ISAs is because they’re much safer for first-time buyers.
Please remember that you have an ISA allowance, which is the maximum you can invest tax-free. For the tax year of 2019-2020, this allowance is £20,000. You’re free to spread this around in different ISAs, but you cannot put money into two of the same types of ISAs in the same tax year.
So, if you want to utilise the maximum £4000 savings in your Lifetime ISA, you can then use the remaining £16,000 to invest in your stocks & shares ISA, or even your cash ISA.
It’s advisable to make the most of your tax-free savings if you have the luxury to do so.