Is it best to pay £4000 into a LISA in a lump sum or instalments?

Is it best to pay £4000 into a LISA in a lump sum or instalments?

Hi.
This is a tricky question! The bonus is paid monthly (if you've contributed that month) and generally takes between four and nine weeks to arrive. If it’s a Cash Lifetime ISA and you have the money ready to pay in, then it behaves like a cash account – the longer it’s in there for, the more interest you get, so if you have £4,000 today – get going!

If it’s a Stocks & Shares Lifetime ISA, it’s less clear cut. The sooner you pay the money in, the sooner you get the government top-up, and so the sooner you have a bigger pot of money working for you in the stock market. Imagine you’re building a snowman – you want the biggest snowball to start with because the ball will grow faster the bigger it is when you start. BUT. The benefit of drip-feeding in is that you remove market timing to some degree and smooth out your buying entry point. So you avoid investing your £4,000 the day before markets tumble, for example, which would mean you bought in at the top of the market.

I generally think that investing little and often is a sensible approach. But for a Lifetime ISA – which gets the government top-ups – I think compounding means you should consider putting in your £4,000 as early in the tax year as possible. Because you secure the 25% top-up – so that bigger snowball gets working for you sooner. The risk is that markets then plunge. However I would say that anyone saving for a property deposit in a Lifetime Stocks & Shares ISA should have a timeframe of at least 5 years, so you should be able to ride out any wobbles over this longer term.

I hope that helps you to make your decision!

Holly