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

28 July 2021

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

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.