The Best Investments for Under 40s in the UK 2018

You might be a student, a businessman, or the young father of a family looking for ways to turn your savings into a bigger house or a long-term investment. There are thousands of suggestions and ways to do it, but in 2018, which are the best and most efficient ways to grow your money?

In this article, we will specifically be exploring the different saving and investment accounts currently available for young adults.

In the first few topics, we will be looking at different accounts available for people looking to get a foothold on the property ladder. The reason for this is these accounts offer the largest returns on investment. If you are under 40 and don’t own a home, these are probably the first options you want to look at when it comes to saving or investing money. Especially if you live in the north of the UK where it is significantly cheaper and easier to buy a home.

Lifetime ISA, aka, LISA

This government backed scheme launched in April 2017 and has an interest saving rate of up to 25%. That’s right, 25%. Obviously, there are terms and conditions, but that is a huge increase on the typical saving account interest rates offered by high street banks which normally range from one to two-point-five percent.

The Pros:

  • Available to anyone between the ages of 18-39, this account is perfect for those looking to retire or become first-time buyers.
  • The Account is limited to £4,000 per year, but for every four pounds you save, the government will give you one pound as a bonus, meaning a maximum of £1,000 a year, tax-free.
  • This is not worked out per home, so if you and a partner are buying together, you could both be receiving an additional £2,000 per year.
  • You can do this for up to 32 years, with the account no longer receiving bonuses once you hit the age of 50, or you have spent the money on a home.
  • You can hold cash or stocks and shares in your Lifetime ISA or have a combination of both. – but the combined total of them will count towards your limit of £20, 000 in the 2018- 2019 year.

The Cons:

  • If you use the money to buy a home it must be in the UK and below £400,000.
  • You cannot rent out your property. While there are some exceptions to this, the general consensus is you are not allowed to use the money saved for a buy-to-let scheme.
  • You can withdraw money early if you want to, but you’ll lose all the growth on your savings and incur a 5% penalty.

This account is offered by a range of different providers, although the majority of these are stocks and shares accounts rather than cash ISAs, it doesn’t really make a huge difference. Cash ISAs currently provide low-interest rates meaning your money will only benefit from the government bonus (which is still a lot of money) and the stocks and shares accounts can grow your savings but a few hundred pounds each year but, there is the risk you will lose money.

Help to buy ISA

You can get this as well as the lifetime ISA, but you only get the government bonus on one account if you are buying your first home, so it’s probably not worth it. These Help to Buy ISAs are also not going to be around much longer, they are being made obsolete by their replacement, the Life Time ISA. If you want to start one of these you need to do it before the shutdown date, November 2019.

Similar to LISAs, the Help to Buy ISA offers an interest bonus of 25%. With the government giving you £50 for every £200 with a limit of £12,000. This means you could make £3000 in bonuses.

The requirements are very similar to the LISA agreement, so I won’t waste your time going through them all again, instead check out this awesome article by Which that helps break down all the information in a lot more detail. It even has a video.

Property Investment

This is a great option for all those people who already have a foot on the property ladder and didn’t quite meet the requirements for the first-time buyer ISAs. While investing in property is possible for first-time buyers, it’s not recommended.

Property investment is hot right now in 2018 and offers a lot higher returns than a typical savings account. Areas such as Newcastle, Sunderland and Middlesbrough offer some great opportunities thanks to their properties low purchase costs and high rental demand.

Northeast property investments normally offer some good opportunities. The north of the UK often has cheaper house prices than other areas, but the northeast, in particular, is seeing higher yields than other parts of the country. House prices are remaining steady with rent prices increasing.  

A strong property portfolio in a stable market can grow investments at a rate unrivaled by very few other methods. Albert Einstein once claimed that compound interest was the 8th wonder of the world. By using a buy-to-let scheme investors can cover mortgage repayments with the rent while simultaneously growing their equity as house prices rise.

If you don’t like to take the risk of investing in a new house or simply don’t have the money, another strong alternative is to simply invest in your current home. A simple home improvement strategy can increase the value of your house significantly. Date released from We Buy Any Home in 2018 shows how a simple basement conversion can increase your properties value by up to 30%.  

Stocks, Shares, and Bonds

Okay so in this section we are going to avoid bitcoin completely. It made a lot of people very rich, but it also lost a lot of people a lot of money. Prior to its explosion in value, many experts predicted it would never be worth anything. That shows the unpredictability of the market, anything can happen, no one is completely clued in. You are taking a risk when you invest.

Despite this, there are a number of stocks that tend to hold their value, items such as gold are infamous for holding their value and big companies such as Apple and Coca-Cola also tend to offer safe investments.

Bonds are seen as safer still but aren’t quite as financially rewarding in the long term. A bond investment is when you lend money to a financial investor in return for interest payments. There are a ton of different types and companies that offer these opportunities.

Savings Accounts

Finally, if you are not looking to retire, buy your first home, or take any risks at all, a savings account is probably the obvious option. It’s also good for those who don’t have much spare time to contribute to growing their money. This is an easy option where you can sit back and relax.Consumer Resource Guide

I have put this last on the list because typically the interest difference between high street banks in the UK is so small that it probably equates to a gain of less than £100 every year. For example, you could research and hunt around for ages to find a savings account which offers a year’s rate of 2%, but with very little research you could also find an account that offers 1.5%.

That 0.5% on an account with £20,000 in it equates to a difference of just £100. For the same amount of work, you could grow your savings a lot more by finding some of the best investments in the above areas. In fact, research shows that simply checking your bank could save UK households a significant amount of money.

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