To save or invest? That is the question.

Turns out, making decisions for your first home starts waaayy before the house hunting stage. It all begins with which account you’ll choose to build your deposit.  

A lot of first-time buyers open a Lifetime ISA because you can score up to £1,000 towards your home every year, thanks to a 25% bonus from the UK government. Plus, you’ve got a choice. With us, you can either save your money in a Nude Cash Lifetime ISA or invest with a Nude Stocks & Shares Lifetime ISA.

But how do you decide? Let’s start with the basics.

What’s the difference between a cash Lifetime ISA and a stocks and shares Lifetime ISA?

With a cash Lifetime ISA, your money and the government bonus gains interest over time. Super simple.

Pros of a cash Lifetime ISA

  • Saving is a safer option than investing.
  • You earn a lil’ bit of interest over time. It’s 0.5% (variable) per year (or in finance-speak, AER – annual equivalent rate) with us.
  • Your government bonus and interest are tax-free.

The downside of a cash Lifetime ISA

  • House prices could go up faster than it takes for you to build your deposit (but hopefully, with our help, that won’t be the case).

With a stocks and shares Lifetime ISA, your money and the 25% government bonus will go into a fund which buys shares of companies and other assets. This means your deposit relies on them being successful.

Pros of a stocks and shares Lifetime ISA

  • If the value of your investment goes up, you could buy your home sooner.
  • Your government bonus and any return on your investments are tax-free.

The downside of a stocks and shares Lifetime ISA

  • If the value of your investment goes down, you could lose some (or all) of your money and it would take you longer to buy your home. Major buzzkill.
  • The government bonus and returns are reinvested so the value of these can also go down so you can lose some or all of this as well.

How do I choose between saving or investing for my first home?

Ask yourself these two questions and you’ll be off to a good start.

When do I want to buy my home?

Typically, anything under 5 years is a short term goal and if it’s over 5 years, it’s a longer term one.

If you have a longer term goal, you might be more likely to invest, because it gives you a better chance of getting a return (even though it’s not guaranteed).

If you have a shorter term goal, you might be more likely to save, because you are less likely to be able to recover from a potential loss in investments.

If you’re not sure when you want to buy your home, our app can help. Set your budget, tell us how much you can set aside each month (and how much you’ve already put away) and we’ll show you how long it could take to buy your first home.

How much risk do I want to take?

As mentioned in the pros and cons, saving can be a risk if house prices go up faster than you can build your deposit and investing can be a risk if the value of your investments go down. But typically, investing is riskier than saving.

Different investments also come with different risk levels — from low, to medium to high. On a scale of 1 to 7 (1 being lower risk with typically low returns and 7 being higher risk with typically high returns) the sustainable fund that you invest in with a Nude Stocks & Shares Lifetime ISA sits at 5.

During the year ending 30 June 2021, the sustainable fund we offer gave investors a 15.47% return on their money. Top this up with the 25% Lifetime ISA bonus, and that’s a mega 40.47% deposit boost. Think about how much sooner you could buy a home with that?!

Ps: As much as past performance shows you how well an investment could perform, it doesn’t mean it will always be that way. It could be less and it could be more (🤞).

If you’re still unsure, you could always start with a cash Lifetime ISA and switch to a stocks and shares Lifetime ISA in the next tax year (or the other way around). The earlier you start putting money aside, the earlier you start building your deposit and the more you can get from that 25% government bonus.

Why open a Lifetime ISA with Nude?

With Nude, you get so much more than a government-boosted savings or investment account.

You get:

  • An interactive countdown that shows you when you could buy your home.
  • Personalised ideas that help you put more money aside.
  • Money-saving challenges that could help you buy sooner.
  • ‘Team Up’ — our feature where you an your partner (or bestie) can collab on the deposit for your first home together. When you both open a Nude Lifetime ISA, you could get up to £2,000 towards your home every year.
  • Features based on behavioural science that help your brain build better money habits.
  • A place to keep track of spending.
  • Automatic payments to build your deposit in your sleep.
  • Sustainable investments with the Nude Stocks & Shares Lifetime ISA.
  • Exclusive in-app content about money, mortgages and the home buying process.
  • + access to all our exciting, upcoming features!

Ready to open your Lifetime ISA and start saving or investing for your first home?

👉  Install the Nude app and open or transfer your Lifetime ISA now.

👉  Go here to learn more about our Cash and Stocks & Shares Lifetime ISAs.

👉  Read even more reasons why you should use Nude to build your first home deposit.