Next Steps for our First Steps...

“Congratulations, you’ve been drawn!” Every 5th of the month another dozen (and growing) StepLadder First Steps members hear this great news. Now, there’s £500 - £1,000 available to them…. But, what to do?

Of course, we want our members to enjoy the fruits of reaching financial goals.  If there’s something specific that you’ve been waiting to buy – being drawn for the lump sum in your Circle could be the moment you’ve been waiting for.  We applaud your commitment and focus.

However, for many, we’ve heard a different question: “how to turn this first lump sum of money into capital, not spending cash.”  This article is for these members and, hopefully, for you – as you think longer term about reaching bigger financial goals and having your money work for you.

In case you didn’t know, I spent the better part of 20 years in investment management in London, myself.  So this question, and challenge, is near and dear to me. Although this does not constitute as not financial advice*, I hope the next couple paragraphs offer some insights and help you get thinking about your goals. StepLadder is here to help – so, please let us know if this and our newly added partner offers for First Step members can make a positive impact in your plans. 




LISA – or cash lifetime individual savings account. 

Offered by Moneybox.

This is a savings account, first and foremost.  Because it is a cash holding at an authorized and regulated firm, it is low risk – and offers a relatively low interest rate.  Money held in this type of account has the benefit of deposit insurance up to £85,000. You don’t need to worry about the value of the account going down.  But, it also doesn’t go up much either. Also, because it’s money in an ISA, your access to it is specifically limited. Good for keeping you from spending it – but means it’s out of reach in a daily-life emergency.

However, there’s a twist – and you might have noticed it in the name.  A Lifetime ISA has another benefit that adds value, over and above the interest on offer, if you are under 50 years old.  For every £1,000 added in each tax year (April to the next March), the UK government will add a £250 bonus! This is the case up to £4,000 added each year – for a bonus cap of £1,000 annually.  Unfortunately, this bonus is withdrawn if you take money out before you turn 60, and you can only pay in until you're 50^.  

There is one more very specific reason we wanted to introduce StepLadder First Step Members to the LISA: you can also keep the bonus IF the money is used for buying your first home.  Hopefully, you can see why we thought this should be on your radar. But, it’s worth knowing that the money in a LISA is only released on completion of a property purchase – while deposit money is needed earlier, for the exchange of contracts.  This is an important detail. Drop us a line to learn more.

Stocks+shares. 

Offered by Tickr**.

This is an investment account.  The value of investments go down as well as up, especially if watched on a daily basis.  That movement can unsettle some people. If it does you, probably should stop reading this.  Looking to stocks+shares for short term results is actually closer to gambling, not investing.  However, a wealth of research and history suggest that over the span of decades, the overall result is investments growing in value – at a rate that leaves cash earning interest in the dust.  That effect is most reliably realized over LONG periods of time, not short ones.  

This also means that putting money meant for a specific purpose – say a property deposit – into stocks+shares investments means that the account value may be lower just as those funds are needed.  But, unlike an ISA, money you put into an account with our partners at Tickr mean that you can access some, or all, of your account value, if an unexpected personal expense comes up.  

For StepLadder members opening an account with Tickr, you also get a £10 bonus added. You may ask why we chose to partner with Tickr?   We believe for many of our members a company’s mission matters.  We hope that’s one of the reasons you joined our Circles. Tickr sets out a mission of (1) making investing accessible and (2) grow investments whilst doing good.  You can read more here about what Tickr means by this in the form of their “impact investing” themed portfolios. 

Fractional property ownership. 

Offered by UOwn***.

This is an investment account.   Uown is “property investing made simple,” in their own words.   Uown has a range of properties on their site. In addition to pictures and descriptions, details of each as an investment appear.  These range widely – and should be carefully looked at individually. With an account at Uown, you can choose to buy a share in one, or some, of the choices on offer.  

However, these investments may go down as well as up – just like property values.  Some investments are riskier than others. As a guideline, property construction or new-build development should offer higher returns for the riskiness, compared to buying a share of an occupied flat.  But other risks exist: how soon (or delayed) capital invested could be returned from a sale of the property, vacant rental properties have no income (and could even be seized, if there’s a mortgage on the property as well), and as a part owner, if repairs are needed, there’s additional cost.  Still, StepLadder members saving for an investment property of their own may want to begin getting experience through the Uown alternative,.  

For StepLadder members opening an account with UOwn, you also get a £25 bonus added.  We know there are other operators of similar property investment platforms, but only one – Uown – has also been a StepLadder member.  Shaan Ahmed was a member of our very first £1,000 per month Home Circle in 2018. We love growing the StepLadder community and supporting our members.

Home Circle. 

Offered by StepLadder****.

This is peer-to-peer lending.  But, reading this, you probably know that already! Our Home Circles are focused on helping our members own their own home faster.  Operating like a First Steps Circle, the main difference is that the lump sum is released when you are ready to exchange contract on a property.  Note, a Home Circle may work very well alongside a healthy balance in a LISA, given the timing difference in access to the money when buying your first home.  

We have a range of Circles to suit many budgets and our friendly team are always on hand to help you on your journey. If you are ready to take the next step towards property ownership, why not apply to a bigger Circle with StepLadder and see if you could own your own home faster? 

We have spent time with each of these companies ourselves, but please check them out for yourself – links to home pages for each are above and on our dedicated partners site.

As First Steps members, we believe you’re already on a path to reaching your financial goals.  We want to continue supporting you on your next steps – and for that reason we are so pleased to share this range of alternative offers.  If you have questions, we are happy to help. 

 

*You should ensure that if you require this you obtain it from an appropriately regulated financial advisor.

** Capital is at risk. 

***Capital is at risk. FSCS cover may only apply in certain circumstances.  

****Capital is at risk. Not FSCS eligible.  

^ Tax treatment is dependant on individual circumstance and is subject to change. 

Matthew Addison

Matt is the Founder and CEO of StepLadder. He started StepLadder to make a lasting positive impact on UK first-time home buyers and fix a broken system

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