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

JayD

I think you should pay your debts and put anything left into 3 accounts between the children - and whenever possible add to them all.

Also make sure you now stay debt free and try opening a savings account for yourselves. Get into a saving habit - no matter how small. The forecast is always for rainy days, so save for them!

xoxox

Hello several points:

- I don't see why you shouldn't pay off your debts - it means you're paying less in the long run, and that's only ever gonna go back to the kids, right?
- If you'll have money to spare for a holiday then i think you should safely invest it for all 3 of your children - either by putting the remainder back in the bonds; savings investment etc. look around for the best option

IF you decide not to use it pay off your debts though, I think it should be split between the 3 children, definitely. Provided you let that set a precedent - any other wins however big or small must also be split between the three kids.
Unless you're lucky enough to get another big win, and then you could maybe pay the debt instead of splitting it?

Good luck!

WastingMyTime

It's NOT your win-fall.

Split the winnings between the three trusts.

The debts are your own fault and you should take responsibility to sort them out with your OWN money. Not your kids!

Your comment on 'taking us all on a holiday' suggests that you have not learnt to keep yourself within your own means. You could have suggested to split the remaining money between your children!!

My parents did a similar thing to me when I young and used my money to pay for stuff (and yes, one was a holiday). I still feel the pain of paying for their short-sighted gluttony and mistakes.

Give your children the best start to adulthood that you can. Teach them the value of money through your experiences and accomplishment of getting rid of your debt by using your money

Serendipitious

Congratulations on the win !!!

If this were me, I would consider this windfall as beginning a family policy of treating this (and any other future wins, across all three sets of bonds, up until the 18th birthdays) as a family win. Take up to ten percent of it as family treat money, and divide the rest five ways, investing the children's shares wisely..

Use the parental portions to pay off debt, and if the debt exceeds 36k, roll up the existing payments that are now freed up to accelerate the debt reduction of the remainder. This should immediately ease the family's debt burden and improve quality of life for everyone.

It is entirely possible there will be future wins. Get it so that it feels right on this first one and it will set a precedent for any others.

There is plenty of advice on various financial planning websites on what to do with a windfall, most recommend splashing out with a percentage of fun money then taking time over deciding exactly how to invest the rest.

Good luck and may they all win even more !

BIG_NANNY

NO,NO,NO,NO,NO! If you spend this money on YOUR debts you are stealing from your children and you are kidding yourself if you say you will repay it. If you can afford to repay your child you can afford to repay your debts even if it takes long without STEALING from the very people you are supposed to love, protect and be true to above any others. You are just trying to justify to yourself with an excuse to use the money as yours and have a splurge. The thoughts of what you are contemplating makes me feel as equally sick as it does angry!!!!

Buy yourself some bonds and keep your fingers crossed but keep those very same sticky fingers off your child's money. I would split it between the three in trust but to receive it more at 25 than 18 unless they wanted to use as deposit on a property or were getting married before then.

zipman23

Surely you would stay in control of the money until they all turned 16/18?

Pay off debts and split 3 ways. Don't use money for a holiday. If you really want a family holiday, use the money that you save by not paying off the debts to fund it.

so88888

First, do the maths.

Establish what will generate the highest financial return from the £100k. This is likely to be paying off the debt and thus saving interest payments. It is possible that spreading the money between the children and investing on their behalf would generate a higher return (especially as they would each have a tax free allowance). However, given current historical low interest rates that seems less likely and you may not be attracted to more risky investments.

So, assuming debt achieves the highest return, you should use the money to pay off debt.

In the future, perhaps when your children are all grown up, you will have to decide whether to fund one sibling, all of them, keep the money, or something else. I can't comment on which to choose. Its entirely to you - your children, your money invested in their names.

But I can tell you that it's only when you decide to distribute that money that you need to decide.

That's because it's only at this point that you either. a. Keep the money (ie leave the debt paid off) or B. borrow money to pay the children. Either approach will ensure you have wasted the least money in the intervening years /earned the highest low risk return.

By the way, if you are worried about the children not getting a fair return, you can borrow more so you repay including interest, provided you pay at the interest rate they would have earned themselves, which we've established would have been less than the debt you paid off.

Fairly straightforward.

(The only other option is to spend the money - it's almost impossible to assess the value of that - so I've not tried)

minicooper272

This is a complicated one. The fair thing would be to split the money between your three children, after all, you're intending that they will all have the same sum at the age of 18 (I presume), and it is just chance that one account won while the others didn't. Though this technically means that if any of the other accounts win £10, that money should also be split 3 ways.

The thing is, if I won £100k today, I would give a lump of it to my parents to help them pay off some of their debts, after all, a lot of their debts started with paying for child care. This makes me think it wouldn't be the worst thing if you split it 4 ways, counting both parents as one unit!

Partly I think it depends on how you got the debts - if it was paying for something for your kids, then it's more fair than if it was just your own e.g. student debts. If you mean mortgage, then I don't think you should - your mortgage was something you took on with full awareness, but there's no reason you shouldn't borrow some and pay it back later.

I don't see a problem with paying for a family holiday from the money - it's what the kids will probably use the money for in the future anyway!

Ian181676

If you bought the premium bond in the name of the child then the bond belongs to the child and so does any money it wins. Your duty, as the parent managing the bond, is to do with the prize money whatever is in the best interests of that child. Only you know the child's circumstances, so you'll have to make your own mind up on what that is.

When looking at whether or not you've treated all your children equally, the important thing, to my mind, is that you bought them all the same number of bonds when they were born. Just because one got very lucky, and two didn't, doesn't mean you haven't treated them fairly.

One of your jobs, as a parent, is to bring your children up so they understand, when they're old enough, that what you did with the money was the "right" thing to do, and that doesn't necessarily mean dividing it up equally between them all.

happyinflorida

How much is your debt?

From how this is worded - I'm guessing it's almost £100K because you mention paying off your debts and then having a holiday.

If you've really managed to run up this amount in debt I'd ask you both to cut up all your cards, except one - which you can use for EMERGENCIES ONLY from now on.

You must be paying an enormous amount in interest on debts of this amount. So from the savings you make by paying the debts off, you'll be able to save a lot each month as you won't be paying these debts off anymore. Each month I want you to divide the amount saved into three and paying it into each of your children's savings accounts.

That would be fair. Instead of the creditors getting the interest you can pay it all into your children's accounts and that's the only way to do it fairly.

Do not give to only one as that would not be fair and could cause enormous debt for the other two if they decide to go to university and haven't got the money to do so.

If this was a packet of sweets everyone would say - share it out equally. I think it's the same for this.