SAVVY savers could open a banking account with just the small change in their pocket, and benefit from THOUSANDS down the line.
Opening a Lifetime ISA (or LISA) means you get paid for stashing away your cash.
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The savings account allows you to get a 25% bonus from the government on any money put away towards a first home or retirement.
If you put £4,000 into the account (the maximum amount allowed each year), you’ll be given an extra and free £1,000 towards your first home.
You can put anything from £1, to the maximum amount into the account though, and get 25% of that added after 12 months.
So if you stuck at piling in the maximum into the account for the next four years you could be £4,000 richer by the end of it.
The timer resets every tax year, so you don’t have to fork out the money in one go now – you’ve got until April 5 next year to cash in on this year’s allowance.
But you can also only open a LISA if you are aged between 18 and 39.
Money experts like Martin Lewis have encouraged the move in the past – as it is so easy and cheap to open one, you have nothing to lose.
If you put a pound in now, even if you’re not thinking of buying a house yet, then the clock starts on your bonus totting up.
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The account has to be open for at least a year before you’ll see the bonus added too, so it’s a good idea to get started sooner rather than later.
And even if you did leave it alone for a year you’d still get a free 25p added after that time too.
You might choose to put more than that in though, to max out the bonus you can get.
But, it’s important to only put in money that you can afford to stash away.
That’s because the money in the savings account can ONLY be used on either your first property or your retirement.
There’s a penalty of 25% of the amount withdrawn if you use the money for anything else, so you’d have to PAY to get your hands on the cash you’d racked up any earlier.
Opening the account does have other benefits though, so you’re not just sitting around waiting for the extra money to come in.
You earn tax-free interest on whatever you save as well as getting the bonus.
Like with other forms of Individual Savings Accounts (ISAs) the LISA comes in two forms, cash LISAs and stocks and shares LISAs.
You’ll have to keep in mind which you’d rather take out as stocks and shares can be risky and your invested money could go up or down, while a cash LISA will only keep what you put into it.
There area few more rules to getting your hands on the cash again though.
If it’s a first home that you’ve got in mind for later down the line, you’ll need to be buying a property that costs £450,000 or less to qualify for the bonus.
You can’t be a cash buyer either and the mortgage can’t be a buy-to-let deal.
On the other hand, if you’re putting the money away for your retirement, you’ll need to keep in mind that you can only withdraw cash from the savings account once you reach the age of 60.
That may be a long wait but the bonus is paid in every year you save something into the savings account, and this will continue until you hit the age of 50.
So you could get up to £33,000 if you opened an account at 18 and continued adding to your savings until the maximum age.
Just don’t forget to shop around for the best LISA rate.
You aren’t tied to one provider, so if you’ve got an account you can still shop around for the best rates.
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