If someone told you there was a way to get £32,000 extra added to your bank account just by saving money regularly, I’m sure it would get your attention.
Well, the good news is this isn’t the start of a terrible joke - it absolutely is possible to have this huge cash injection.
The bad news? There are conditions attached to the offer, so you might not be able to book that dream holiday to the Maldives quite yet.
To unlock this bonus you’ll first need to open a lifetime ISA.
Lifetime individual savings accounts (LISA) were set up to help people in the UK buy their first homes or save for retirement.
This is important because the LISA bonus can only be used for those two purposes. If you decide to use the cash in another way you’ll be stripped of your bonus and could even lose some of your original savings.
But, by sticking to the rules, you can get up to £1,000 extra a year added to your savings for 32 years.
To open a LISA you need to be over 18 but under 40, so if you hit this demographic it’s a good idea to consider this savings account.
The sooner you start saving, the bigger the bonus.
For example, if you opened a LISA on your 18th birthday and continued saving £4,000 every year until you are 50 years old, you would earn the total £32,000 bonus from the government.
Your 50th birthday is an important milestone for a LISA holder, because this is when you have to stop paying into the account. However, you won’t be able to withdraw the money and keep your bonus until you are aged 60.
So, that’s the first example of how to maximise the LISA’s government bonus and enjoy retirement, but it can also be used for buying your first home.
Now, you won’t reach the heights of £32,000 in bonus money, but you still have the opportunity to earn some extra money to help with your deposit or moving fees.
If you started saving £4,000 on your 21st birthday and you bought your first home aged 33 - which is the average age for a first-time buyer outside of London - you would have a bonus of £12,000.
However, there are some rules you need to follow if you are using your LISA savings for your first home.
The property has to cost £450,000 or less, which can be tricky in today’s housing market when our latest mortgage report found the average cost of a first-time buyer home is £466,660 in London.
You must also buy the property with a mortgage and at least 12 months after you make your first payment into the lifetime ISA. You also need to use a conveyancer or solicitor to act for you in the purchase, and the LISA provider will then pay the funds directly to them.
If you would like to buy your first home with someone else, and they also have a LISA, they can use their savings and the bonus to boost the deposit for the house too.
However, if you withdraw your LISA savings for any other reasons, then you’ll have to pay a withdrawal charge of 25% - with the only exception being if you’re terminally ill.
And that 25% charge means you’ll not only lose the government bonus, but you will also lose some of your savings too.
For example, if you pay in £2,000 in one year then you’ll get a government bonus of £500, making your savings pot £2,500. But if you withdraw it too soon, you’ll be penalised 25%, which is £625. That means you lose £500 from the government bonus and £125 from your savings.
This is important to consider, as although you can access the money, it’ll come at a cost.
Overall the potential of a LISA is huge, but it has to be used correctly to make the most of the government bonus.
The Maldives might have to remain a dream for now, but on your 60th birthday it could become a reality!
As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.