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

13 July 2018

Question by Malti

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?

Answered by Holly Mackay

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

A stock market crash in the next year could see your money fall 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 your timeframe means you can't.

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 interest 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 sites and make sure you’re OK with the ts and cs of a Lifetime ISA.

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.

Good luck

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

Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.