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I'm going to suggest my daughter open a LISA for her first home eventually? Is this a good idea?

28 July 2021

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Question by Allison

Hi There, my daughter has just turned 18. she has a total of £3,500 to lock away, in a combination of short and longer term. I was going to suggest she open a LISA for her first home eventually? is this a good idea? How should she split her savings and where should she put her savings - thanks. She has a part time job so can put a small amount away on top of this per month. And will be getting student loan in September again to put away for emergencies. Any help appreciated.

Answered by Rachel Efetha

Hi Allison

Thanks for your question. For the shorter term (less than five years), I would recommend cash, and the longer term, some form of investment. The LISA is a great idea if she is going to use the proceeds towards a house but there is an additional 6.25% penalty on top of the loss of the tax relief if she withdraws it for anything other than buying a property or keeping it for retirement, but I'd recommend that she builds an emergency fund outside the LISA to give her some flexibility if she needs to replace her car/ laptop etc - depending on how much the bank of Mum & Dad would get involved for these emergencies!

I hope this helps.

Answered by

Rachel Efetha

Chartered Financial Designer

Rachel has nearly 30 years’ experience in Financial Services, with the last 21 years advising clients. She advises on a holistic basis but particularly enjoys Cashflow Planning to see when her clients can afford to retire, and has reduced grown men to tears twice by telling them they could afford to resign right now. As a divorcee herself, Rachel loves coaching women going through divorce to take financial control, and has successfully argued with solicitors to gain her clients a much bigger slice of the pension pie.