While there are very few constants in life at the moment, one thing appears to be fairly certain: houses in the UK arenβt getting any cheaper.
Unfortunately βif you are young, and especially if you are young and single β the UKβs political economy is devoted to supporting perpetually increasing house prices. Whether this is sustainable is an open question, but if you are looking to buy a house in the near future and donβt have generous and wealthy relatives it is certainly a bit of a bummer.
However, there is a way for you to get some kind of recompense from the government for this appalling mismanagement: the Lifetime Individual Savings Account (ISA).
Hargreaves Lansdown recently released figures, showing the average essential costs of putting a roof over their heads including rent, mortgage, council tax and fuel costs single people an average of Β£7,974 a year. For couples it is each Β£6,215 each, or Β£12,430 combined.
Essential housing costs take 34% of the income of single people and 23% for couples. Singles are also less than half as likely to be βon trackβ withΒ home ownership, at 18% to 43%, according to the investment firm.
So if you can save any money here, itβs a no brainer. And thatβs where Lifetime ISAs (LISAs) come in.
How LISAs work
If youβre aged between 18 to 39 you can set up a LISA, which will provide you up to Β£1,000 from the government a year, tax free.
To collect the full bonus, you need to save Β£4,000 in a LISA in a given tax year, which runs from April 6th to April 5th in the following calendar year. The bonus is paid on contributions made during a given month, at the end of each month.
This money can only be accessed to purchase a house, or after you turn 60. There is a 25% withdrawal charge if you take out money from a LISA for any other reason, unless you are terminally ill.
You can only pay into a LISA up to the age of 50. Your funds must be kept in the LISA for at least 12 months after your initial deposit, or you will incur the withdrawal charge.
There are Cash LISAs, which allow you to collect the interest on your savings tax free, as well as Stocks & Shares LISAs, which allow you to invest your savings on the stock market (either directly or through a managed service).
If you already have other types of ISAs open, this will not prevent you from opening a LISA. It is also possible to open more than one LISA, and transfer your LISA from one provider to another, but you can only pay into one LISA each tax year.
You can view our list of some of the best LISA providers on the market through this link.
Robin has more than six years of experience as a financial journalist, most of which were spent at Citywire, and covers the latest developments in the investing, trading and currency transfer space. Outside of work, he enjoys reading literature and philosophy and playing the piano.
You can contact Robin at robin@goodmoneyguide.com
