Martin Lewis has urged everyone aged 18 to 30 to open up a brand new bank account and stick £1 in it, with the hope of eventually making thousands of pounds for free.
Known for his countless tips over on the Money Saving Expert (MSE) website, Lewis and his team of finance gurus regularly tell us all how we can save money in ways we might not have even known existed.
Just a few days ago, Lewis warned 14 million Brits over the cost of their phone contracts and how sending one simple text has the potential to save you bucket loads.
And this past weekend, Lewis was here again with some more sage advice where he gave an exclusive talk in London.
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Speaking at the Ideal Home Show at Olympia London, which runs until 7 April, Lewis brought up one money saving exercise that could see young people land thousands extra in their bank accounts by hardly doing anything.
He was on about Lifetime ISAs, which you might have seen advertised as a LISA, and how opening one up and putting one quid in could do you the world of difference.
Lewis explained: "Anyone aged 18 to 30, open up a Lifetime ISA and get at least £1 in this.
"The reason being that you need to have a lifetime ISA open for a year before you can get the bonus. When you do eventually want to put money in, this won’t be a problem – but get at least £1 in this now.
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"If you don’t ever use it, you lose 6.25% to take the money out, so you’d lose 6.2 pence, and I would say it’s worth the risk really.
"If you’re looking at savings, you want something strong interest."
And when Lewis says strong interest, he means strong interest, with the account giving you a bonus of up to £1,000 a year.
What are Lifetime ISAs?
A Lifetime ISA (LISA) is a savings account to help buy your first home and get on the property ladder. Alternatively, it can be used just to save cash for later on in your life.
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You can use a LISA to save a maximum of £4,000 a year in every tax year.
Anyone aged between 18 and 39 can open them up for free.
How do I get a free £1,000 from my LISA?
Thanks to the government, it will match your savings with a 25% bonus on top.
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So, if you save the maximum of £4,000 a year, the state will give you £1,000 for free. That's it, no catch.
Obviously the amount you are given depends on what you put in, but even if you can only save £500 a year, you'll get another £125 for free. So, it's worth doing regardless of the £4k figure or not, especially given its also tax free.
When Lewis talks about needing the account to be open for a year to get the bonus, it's due to a technical rule on a LISA that says you only get the bonus if you take money out 12 months after your first payment into the account.
When do the £1,000 freebies stop?
You'll have a long time to enjoy this, thankfully.
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As it stands, the LISA terms mean you will be given a bonus on your annual savings of up to £4,000 until you hit the age of 50.
You'll get a bonus every month, if you've contributed during that month, and it will then take up to nine weeks to arrive in your pot. You will also only continue to get bonuses if you continue to contribute. You don't make money off of interest; it's purely on new money being added.
When can you take money out of your Lifetime ISA?
This is the tricky bit. You can't just take the money out with the interest added so you need to be prepared to know you can't touch it.
You can withdraw money from your ISA if you’re:
- buying your first home;
- aged 60 or over;
- terminally ill, with less than 12 months to live.
If you really do need the money, as we all know circumstances change, your 25% bonus is taken as a charge on the account. So, you wont lose anything, but you also won't gain a penny.
Featured Image Credit: IdealHomeShow.co.uk / Getty Stock ImagesTopics: Martin Lewis, Money, UK News