Saving with Lifetime ISA
A Martin Lewis fan recently shared their success story of using a Lifetime ISA (LISA) to save £6,000 for a first home deposit. The LISA, highlighted by the founder of MoneySavingExpert.com, is a savings account that allows individuals between 18 and 39 to deposit up to £4,000 per tax year. The government provides a 25% bonus on top of personal contributions, making it an attractive option for saving towards a home or retirement.
How It Works
Steven and Jade, who emailed MoneySavingExpert.com in March, explained that they deposited the maximum £4,000 into their respective LISAs for three years. This contributed to a total savings of £24,000, with a bonus of £6,000. They combined these savings with other funds to put down a deposit on their first home.
Cash or Stocks and Shares?
There are two types of LISAs available – a Cash LISA and a Stocks and Shares LISA. A Cash LISA is suitable for saving towards a first home within a couple of years, while a Stocks and Shares LISA is more suitable for long-term retirement savings. It's important to note that using LISA funds for purposes other than a first home or retirement may result in additional fees.
Additional ISA Options
In addition to LISAs, customers also have the option of investing in conventional cash or stocks and shares ISAs. Cash ISAs allow individuals to save up to £20,000 per tax year and offer options such as easy-access and fixed-rate ISAs. Stocks and Shares ISAs provide more flexibility in returns, as the value can fluctuate based on investment performance. However, there is also more risk involved, as the money is invested in shares and bonds. Fees may also be applicable for Stocks and Shares ISAs.
Overall, the LISA offers an attractive opportunity for individuals to save towards their first home or retirement. With the 25% government bonus, it can be a significant contribution to a deposit or long-term savings goals.
