Why You Should Get A Help To Buy ISA Even If You Don’t Know Where You’ll Be In 5 Yearsfeatured

A few weeks ago I met up with a group of friends that I’ve known for years. In our university days we’d spend our weekends chatting about who threw up on themselves the night before and who’d brought a lad back for the third consecutive week. Now, the topics of our conversations have changed. We’re more likely to discuss our jobs and money than we are to talk about who fell head first down the stairs in Tiger Lounge. A lot has changed for us in the last five years.

During this particular meet up, we found ourselves contemplating how ‘old’ and sensible we’d become. We were talking about progressing our careers and buying houses and lots of super-civilised stuff. One friend pointed out that she’s been thinking of buying a house one day with her boyfriend but she’s not sure whether to bother getting the Help to Buy ISA because:

A. You can’t use the Help to Buy ISA to buy a house outside of London for more than £250,000

B. Her and her boyfriend may not buy a house together after all

C. She doesn’t have a clue what will happen in the next few years

In the end she decided not to bother with the Help to Buy ISA and to continue saving in a regular (low interest) cash ISA instead.

As a side note, I should probably admit that I’ve spent FAR too long saving up in one of these shitty low-interest ordinary Cash ISAs myself.

The thing is, none of us know what will happen in 5 years time but just because we don’t know what the future holds doesn’t mean we should be passive or avoid preparing for it. After all, here my friends and I are talking about how we have no idea where we’ll be in five years, when five years ago we were probably lying in bed with stinking hangovers after a crazy night of ‘living life to the full’ and pissing our money up the wall. If we’d started saving money from our part time jobs back then, we’d be financially better off now.

I think we half thought that the future wouldn’t happen and half thought that we’d wind up rich enough to deal with whatever life threw our way.

However, five years from now we’ll probably regret being so indecisive in our mid-twenties.

So, despite my friend’s concerns, I personally think that the Help to Buy ISA would be a great way for her to save for the future, make the most of her cash, and keep her options open. Let me explain…

In this post I’m going to assume you have a rough idea what the Help to Buy ISA is and how it works. If not, take a look at my Help to Buy ISA guide.

Also, please note that I’m not a financial advisor. I’m just a girl with a money saving blog. So, make sure you do plenty of research before deciding which savings method is for you.

You don’t have to use the money you save in a Help to Buy ISA to buy a property

If you squirrel money away into a Help to Buy ISA each month and then 5 years down the line decide to ditch your plans of home ownership and go backpacking around the world instead, that’s fine! You can withdraw the money and use it however you please. You also won’t be charged for your withdrawals. The only downside is that if you use the money for something other than a property, you won’t get the government’s 25% top up.

You’ll still get the interest you earnt on your savings

Even though you won’t get the government’s top up on your savings, if you use the money for something other than a home, you’ll still get the interest from the bank. If you opt for a Help to Buy ISA with Halifax or Santander, you’ll get a whopping 4% interest. That’s pretty hard to beat.

The Help to Buy ISA could be a great way of keeping your options open

There are some ordinary savings accounts out there that offer 4% interest but if you eventually do decide to buy a house with your money, they won’t reward you with an extra £50 for every £200 you’ve saved. It’ll be too late. You’ll be on a one way train to Regret City.

By regularly contributing to a Help to Buy ISA, you’re building up a healthy savings fund, gaining interest and giving yourself the opportunity to benefit from an unbeatable government boost should you decide to buy a home in the future.

Besides, even if you don’t use your savings to buy a home, your money is a lot better off in a Help to Buy ISA paying 4% interest than it is in an ordinary Cash ISA that gives you 0.25%.

In April 2017, the government’s new Lifetime ISA will come into force and so it’s worth comparing the two to figure out which is best for you. The Lifetime ISA offers numerous benefits but, unlike the Help to Buy ISA, you may face charges for some withdrawals.

To help you get to grips with it all, I’ve written this comparison guide that looks at whether the Lifetime ISA or Help to Buy ISA is best. I’ve also created this in depth guide to the Lifetime ISA.