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I'm 12 months away from buying a property. Should I invest some cash savings in stocks & shares ISAs?

Malti | London| 25/07/2018 | 2

  • Stocks and Shares ISA
  • Lifetime ISA
  • Cash
  • Mortgage

Malti's question in full

I have cash saved in ISAs and savings accounts - probably a 30% deposit on a property - first time buyer. I currently only have a temporary job after returning from a career break to travel, so can't get a mortgage yet. I am also at least 12 months away from getting a permanent job (and getting through any probationary period), so at least 12 months away from buying a property. In the meantime we will have Brexit (maybe?!), which is likely to affect property and investment returns at least in the short term. If you were me, what would you do with the cash in the meantime, before buying a property? Best just to leave it in cash for now, or invest a portion in stocks and shares ISAs, and keep the rest in cash?

Holly Mackay's Response

If you are thinking about a 12 month period I wouldn’t go near the stock market.

Imagine we have the Mother of all crashes because (for example) Trump starts a war (I’m making that up!) and your money falls in value by 20% - you’d be devastated. If you were saving for 10 years these ups and downs are largely irrelevant because time means you can ignore them. But you cant. 

So stay with cash.

I would say as a first-time buyer you can increase your savings a bit with the Lifetime ISA. You can stick in £4,000 this tax year and get a £1,000 freebie top-up from the Government.

If you stick with cash (which given your timeframes you should) then a Cash LISA is your choice. The rate is a rubbish 0.5%* but you’ll get that 25% Government top-up which is better than a kick in the teeth!​

(Since this answer was first published there are now two new Cash LISAs on the market. Meaning that as of November 2018, you can now choose a Cash LISA from either Skipton, Nottingham or Newcastle Building Societies).

Have a read on their site and make sure you’re OK with the ts and cs.

With the rest of the cash make sure it’s earning as much as possible. With a 12 month window think about a fixed term deposit. Eg Atom Bank are paying 2.05% today on a 1 year fixed saver.

Good luck!

 

*Since writing this, the Bank Of England raised rates and the Skipton LISA now pays a slightly less rubbish 1%!

 

 

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Holly Mackay

Founder and MD of Boring Money, Holly Mackay has been working in the investments space since 1998. She read Modern Languages at Oxford, with a special focus on Mediaeval French which was deeply interesting and arguably utterly useless.

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