Real-life MMD: Should I use my 5-year-old's £100k Prem Bond win to pay debts?

Former_MSE_Debs · 26 September 2013 at 5:18PM

Money Moral Dilemma: Should I use my 5-year-old's £100k Prem Bond win to pay debts?

We bought each of our children Premium Bonds when they were born - they're now eight, five and two. The five-year-old just won £100,000. Should I put it in a trust for her until she's 18, split it three ways in separate trusts, or use it to pay our debts and treat them to a holiday?

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Tiggy10 · 1 October 2013 at 8:02PM

In my opinion you should use the money to pay off the debts. Split whats left 3 ways- as you have to be fair to the chn. Then make sure you make regular payments into a savings account for the three until they are 18 to make up for it.

counting_down_the_days... · 1 October 2013 at 8:17PM

I think you should pay off the debt, split the remainder 3 ways & pay back what you took + the interest. Then once paid off you can treat the family to a holiday.

hldomster · 1 October 2013 at 8:22PM

You should definitely keep it in an account for the 5 year old until they are 18. What was the point of buying them premium bonds if you were just intending on banking the money for yourself should they get a big win? If you do anything other than keep it in an account for the person who won it then you are acting completely immorally.

mgush5 · 1 October 2013 at 8:26PM

I would say pay off as much of your debts as possible where the impact would be significant (ie payday loans) but not low %APR debts as these, now you've paid the biggies, will be easier to pay off and pay the remainder into an account where all premium bond winnings would go. When the first child gets to 18 split and move 1/3 into an account for them and give them the bonds, and when the second gets to 18 half the remainder so at 18 each child gets a fair share. If the younger children win after the 1st gets to 18 that's another issue but I would not buy a holiday, I would have appreciated, as an adult, the money to buy a car or moped which can be used for a long time over a childhood holiday which could easily be forgotten.
The winnings are your childrens and the holiday seems like too much of a treat for you too, you got the bonds for their future. Its a long term reward so use it as such!

scotsbob · 1 October 2013 at 10:19PM

The moral thing to do is put it in trust until she is 18, anything else is immoral.
Remember that in a few years time you are going to have to justify your actions to her.

MattSS · 1 October 2013 at 10:32PM

I guess you didn't imagine this scenario when you invested in premium bonds for your kids! It seems unfair to me to put the £100k in trust for one child (even if it was their premium bond that won) how will the other kids feel knowing their sibling is £100 grand better off than them?

I also don't agree that it is immoral to pay off your own debts with the money and then repay it over a longer time at a more sensible interest rate. This is in the best interests of you and your family so go ahead and do it.

Splashing the cash on a holiday is wasteful however, as your original investment in premium bonds was geared towards giving your children money for the future so I wouldn't necessarily back that course of action.

At the end of the day it's your family and your money dillema to manage, do what you feel is right and don't be pushed around by people on this forum accusing you of being immoral for spreading a windfall amongst all your children and not gift wwrapping it all to one of them

Person_one · 1 October 2013 at 10:38PM

Definitely don't save it all for just one child! I'd take the view that the Premium bonds were for all the kids jointly and its just an administrative thing that means they have to be in one name.

I think paying the debts or not depends on how much of an impact the debt is having on family life. Are you struggling to make ends meet or to keep the house warm? Are they missing out in the here and now?

Would paying off the debt use the whole £100K or can you use some of it and put some into 3 trusts? say 40% on debt and then 20% each in a long term savings account?

lb364 · 1 October 2013 at 11:13PM

I think it would be fair to spend up to £40k (£20k each for the parents) on your debts with £20k (+ equal share of any leftovers) for each child in trust.

However, I personally would give it to them at an older age than 18 as it will be at risk of getting wasted...

hazeljane24 · 1 October 2013 at 11:54PM

Hi, I think it depends on what the debts are and what the impact of not paying them off will be. For example do you have a high-priority debt which is causing issues in any way or affecting yours and your familys quality of life? I don't think the kids need to know when they grow up that only one of them won it - just tell them that you won the money and put it in trust for the 3 of them in equal amounts. That way, God forbid if they ever fall out in adult life there won't be money issues as they can get very messy! I like the idea of splitting 5 ways per family member as then everyone can enjoy the benefits. I do think if you decide to do that you should pay off your debts with your share as parents and use the money that you then save each month to put towards things that the kids can enjoy like family holidays as they will create happy memories and/or into a savings account.
Another idea - put the £100k in a savings account or bond (make sure it is risk free so you can't lose money) and use the annual or monthly interest to pay towards your debts - you may then feel better as you havn't technically touched the £100k and you can still split it between the kids evenly when the time comes.
Final thought - I think giving any large amount to a teenager is very risky as it is likely to get wasted. Perhaps when they grow up and decide what they want to do you can offer to pay for something big in their life such as uni costs, wedding or house deposit.
Hope that helps and good luck!

desperate_dan · 1 October 2013 at 11:58PM

change the trust fund age (if you can) to 21 or 25.
think waht you'd do at age 18 with £100K-flash cars, party, travel and then it's all gone.
at least at 25 may be settled down, in a job and that's a great deposit for a house at that age.

Real-life MMD: Should I use my 5-year-old's £100k Prem Bond win to pay debts?

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