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

pennypinchUK · 2 October 2013 at 8:03AM

Sounds like you bought the Bonds for your children, not so you could buy more for yourselves. So any winnings are rightfully theirs.

Try telling your other 2 children that your 5 year old has £100,000 and they've got nothing. Doesn't sound right, does it? If you go with this idea you'll be accused for the rest of your lives that you've got a favourite child. So set a good example, show your children the importance of sharing, and set aside a third each for them, in a trust that you can't get at.

The only reason you should use the winnings for yourselves is if you're on the edge of going under and this is your final lifeline. If that's so, and you have to use the money, have a very clear plan to pay all the money back, with interest - and stick to it.

And the holiday - that line was just a wind-up, right? Of course you shouldn't use the money for a holiday.

regency_man · 2 October 2013 at 8:18AM

Ignore what these people say about it 'belonging' to that one child, you invested the money, it doesn't belong to them until they become financially independent. If your child somehow owed a large amount of money (all I can think of right now is a fine for something) you'd be expected to pay, so it should work both ways.

Personally, I would feel uncomfortable taking a large portion of it to pay debts, just because of the way it might look to the children - however if you are genuinely struggling with a lump sum debt and the resulting financial freedom is going to improve the lifestyle of the whole family - surely go for it.

Finally, whatever is left, ABSOLUTELY split it between the 3 children, but make a commitment that if any of the others win, no matter how small, they must split it too. Whilst you never invested with favouritism in mind, giving one child a huge windfall and depriving the others will breed a HUGE amount of resentment. Just imagine the scenario when they are all leaving the nest and you've bestowed one with the leg-up to buy a car and a comfortable house, while the other two potentially struggle financially for the rest of their lives.

You are in the fortunate position that splitting the money still leaves each with enough to make a real difference to their early adulthood. A happy, caring and sharing family will be worth more to the lucky child than a few extra thousand.

Ultimately, you have to live with your decision, so do whatever you feel comfortable with.

ashleyriot · 2 October 2013 at 8:31AM

Lol at people throwing the word, "immoral" around.

The children didn't buy the bonds and you have to look at the bigger picture of the whole of the family.

Pay down your debts, learn the lessons so the debts don't happen again and then use the money you are saving month on month (as well as anything left over from the £100K) to buy more bonds for the children.

Could you imagine the conversation when they all turn 18 and one of them has £100K waiting for them purely because of the randomness of a computer picking their number?

That's the sort of situation that people who watch EastEnders look forward to.

KJaybaby · 2 October 2013 at 8:51AM

I would not be able to justify giving all the money to one of my children regardless of who's name the winning bond was in.... you set up the bonds for all three children and therefore wanted to potentially improve all their lives. Without knowing your situation I guess you could put a significant amount in a trust for each of them (£20k, £25k or even £30k) and still pay off your debt (or a good chunk of it). That way everyone wins - what would be the point in putting £100k in one childs trust if you end up all losing your home etc (I'm not suggesting the debt is that bad - just an example!). If it were my children - also aged 5 and 8 - they would not want to see their parents in difficulty and worrying about debt and I'm certain yours would feel the same.
Don't tell the children that they have won - they probably do not understand bonds etc anyway and a £20-£30k fund for an 18yr old is a great start to their adult life - you should do it for all three.
I'm sure you will do the right thing for your family and situation - well done on the win!

Tigsteroonie · 2 October 2013 at 8:57AM

When I was young (five or six), my premium bond winnings were spent on new bikes. I have absolutely no idea whether that was all that was won, or whether the prize was actually £100K and got spent elsewhere; I also do not know whether it was my bond that won, my brother's, or held by my parents.

So I doubt the 5yo in the MMD will really be bothered so long as they benefit somehow. Are they really going to trawl back through documents when they reach 18yo to see how much they actually won thirteen years previous and then hold their parents to account? I doubt it.

Pay off the debts that are affecting family life. Then divide the spoils three ways - and what age they get that money depends on how much it is (eg £100 into savings now, £20K on trust until 16 or 18).

kelda_shelton · 2 October 2013 at 8:59AM

Tiggy10 wrote: »

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.

Do this - but make it age 21. By paying off your debts now you dont have the masses of interest accumulating (thing martin's graph on mortgage repayments) so you pay less debt in the long run and you can put regular savings away for the children to make up for it.

As someone else suggested I'd also 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.

Golfpro_2 · 2 October 2013 at 9:03AM

Simple, lol! First of all you should always have entered into premium bonds savings with the proviso of splitting it three ways up front. Akin to a lottery syndicate.
If not done already work that out now.
If then you have real debts affecting all of the family through unfortunate situation occurring beyond your control. I.e. forced unemployment and Not a gambling habit ! Then the here and now situation supercedes the moral rule of money not being yours. If You are responsible for the investment that brought about the PB win ( assuming it was not others depositing the funds for the kids via birthday pressies etc) then you are custodian of what is best for the family now , as you were when you decided to invest for them. You simply now are choosing to invest in the familys immediate needs. You dont hold back cancer drugs for a rainy day, you deliver it where needed.
There are lots of variables, one assumes for this statement to be correct that in all ways you are responsible people, not the type on the personal loans adverts who decide willy nilly to have an extra 5 k to go on holiday.lol!
Very little point in suffering now , depriving the kids of their childhood right to have fun to simply give them a lump sum later after the divorce!
But dont waste it, secure the three kids with large deposits and only use what is genuinely causing loss and heartache financially.

sleepymans · 2 October 2013 at 9:10AM

What was wrong here, in my opinion is buying PBs in childrens names.
The money a family buys PBs with is in my opinion family funding and any win as we see here is obviously to put any one member in a more advantageous position than the rest of the family. (Not sure about the legal owner of the money in PBs T&Cs in the circumstances outlined??)

One family member could hold the PBs with a commitment to sharing any winnings in a way that the ADULTparents decide is best at the time of the win.

At various points in family finances that mght be best used to clear debts, buy a nice home environment, buy a holiday home, or share between the childrens weddings/education/first car....or whatever...

I believe its the parent's responsibility to think ahead ....I mean, you buy PBs for the chance to win not to invest for childrens future....there are different financial vehicles for that surely?

FatherAbraham · 2 October 2013 at 9:11AM

KJaybaby wrote: »

I would not be able to justify giving all the money to one of my children regardless of who's name the winning bond was in....

The child isn't being given £100,000 -- the child was given a premium bond, and now has won £100,000. The child already owns the money in the eyes of the law.

KJaybaby wrote: »

If it were my children - also aged 5 and 8 - they would not want to see their parents in difficulty and worrying about debt and I'm certain yours would feel the same.

A child's opinion is irrelevant -- young children don't understand money, and that's why, in the eyes of the law, their interests must be looked after by trustees (usually parents) until they reach legal adulthood.

Trustees must look after the child's interests, in a narrow sense. There is no legal justification for a trustee making a risky, cheap loan to himself (that's essentially what Robert Maxwell did, using his employees' pension savings, held in trust for their benefit. He really did mean to pay the money back, of course, and to him it was clearly in their interests that the firm they worked for didn't go bust. The road to Hell is paved with good intentions.)

Nor is it in the child's narrow financial interests to donate money to siblings. Indeed, the comments on here about that seem to be made with respect to the parent's interest and assuaging feelings of guilt. Tough! If the parent wants the others to have the same fund, he or she'd better stump up £200,000 pronto. The parent may not steal two thirds of the winning child's money so that the parent feels better about things.

Taking the winning child's money and doing anything with it other than prudently investing it for that child's future is a clear breach of trust, and would leave the parent open to being sued by the child.

Warmest regards,
FA

Augustus_the_Strong · 2 October 2013 at 9:20AM

If you are all deprived & struggling because you are burdened with debts, it makes sense for the whole family & 5-year-old child to benefit by your paying off the debts - result is better quality of life for all. But it would be good to put some of the money aside for each of the children - share it out and show fairness, rather than having one child keep the lot. A premium bond win is just luck, after all - its not as if the child has earned the money in any way.

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

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