7. Open A Lifetime ISA – 12 Tips Of Christmas

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Open A Liftime ISA

Merry Christmas and welcome to the seventh post of my 12 Tips Of Christmas series. 

These are a series of posts that will be going out on the lead up to Christmas and the New Year to help guide you towards a better money mindset with an aim to give you a base knowledge of personal finance.

So you’ve created a budget, determined a strategy to pay down any debts and saved some cash to set aside as an emergency fund. Now what?

Well as part of your mid-term goal, you may be looking to eventually put a downpayment on a a house.

One of the most optimum ways you can do this is by opening a Lifetime ISA.

I covered the specifics of the LISA in my ‘What is an ISA‘ post a few weeks back so for a full breakdown of how that works, go check that out.

Today I’m just going to reiterate the benefits of this newest ISA that was introduced back in 2017 as a replacement for the Help to Buy ISA.

25% on anything you contribute up to £4,000 a year. That’s £1,000 FREE, per year!

Of course, you need to be certain that this money will be going towards a first house, as withdrawing this money for any other reason will result in a penalty (see ISA post for more info on how that works).

The Help to Buy ISA is also still running though, but only for those that opened an account before November of last year (2019). If you opened one before then you can still contribute to this up to 2029.

I like the LISA though as the bonus is deposited into your account just 4-6 weeks after your contributions are made. This way you can actually see the amount in your account increasing, whereas the H2B bonus was just added at the end once you’d agreed on a house and started the deposit process.

A Lifetime ISA can also be invested rather than solely held in cash. This can be done through providers such as Hargreaves Lansdown or AJ Bell (other available). This is an entirely personal decision and will depend on your savings timeline and risk tolerance.

It’s usually recommended that you should be willing to hold any investments for a minimum of 5 years to ride out any downturns. For me personally, this would still be too short of a timeframe, especially for a house deposit, but again this is an incredibly personal decision.

If you’re unsure of whether or not to open one, why not open one and stick in the minimum £1 (most providers will allow this low amount)? This will allow you a little more time to consider the benefits while not contributing anything significant to the account with that money being locked away until you’re in a position to buy your first home.

You can find a good list of Lifetime ISA providers here.

Remember this is not financial advice and I’m only showing the potential benefits. Please make your own decisions using multiple sources when considering opening something like a LISA.

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