Received small lump-sum for kid...does it affect my benefits?

alicewilliams

Hiya everyone,

One of my kids has received a small lump sum payout due to an accident/negligence.

I have been given the responsibility to manage her money until she is 18, but I don't know what I should do.

One option I'm thinking of, is to place it in long-term (5 years or more) investment, such as shares, but I do worry of the risks.

Since the money is for her, will it affect my ESA benefits?

Thank you

princessdon

How much are we talking about? How old is the child?

Eg there are junior ISA's where they cannot access until 18,

The cheque should be in the child's name so I don't think your benefits will be affected (hopefully those more knowledgeable will confirm), but it's probably less messy if you look at trust funds or ISA's where the child holds title.

alicewilliams

sorry, it's £1900 and she's 12yrs old. Yes the cheque is in her name.

I am very confused and would be most grateful if:-

1. You can clarify the situation with regards to benefits being affected
2. A good way of investing the money.

rogerblack

alicewilliams wrote: »

sorry, it's £1900 and she's 12yrs old. Yes the cheque is in her name.

I am very confused and would be most grateful if:-

1. You can clarify the situation with regards to benefits being affected
2. A good way of investing the money.

Most basic issue - only if you have capital >6K are your benefits affected.

(Unless you need to make a hardship claim after being sanctioned)

Open an account in the childs name - find the highest rate long term secure investment you can, and put it in, is what I'd advise.

In principle there are options with higher returns - but also higher risks.
Do _not_ do _anything_ with the money other than invest it - make sure that it is never in the same account as your money - and keep all documentation that it is to be held in trust.

This should mean that it would be ignored for benefit reasons - even if you do have >4K capital.
(Every 250 you have over 6K reduces your benefit by a pound a week - and it cuts off at 16K)

Also - if your child has the mental capacity - they will normally be able to access it at 16.

princessdon

As roger says, you are allowed £6000 even in your name

So it's down to investment choice.

Do you want it locked away?

Personally (and I'm no expert) I'd just use normal savings (6 and 4%)

This way if she wants a school trip or needs some money it's there as the interest on that amount is negligible anyway.

alicewilliams

Thank you very much for your reply rogerblack and princessdon.

So just to clarify, as long as I/my kids have a combined saving(s)/investment(s) of £6000 or less, then my benefits won't be affected?

There are too many choices and many have little clauses, so based on your experience, can you give me recommendations as to which account(s) give a high return over the long term and with which bank/building society? I don't mind even online or locking it away, if it gives a good return for my daughter by the time she is 18yrs old.

I know that investments such as shares are risky, but a friend said banks for example are a good long term investment...According to them, RBS needs to hit £5 before the government can sell it and lloyds has already hit the minimum government's target of 75p.

Voyager2002

alicewilliams wrote: »

Thank you very much for your reply rogerblack and princessdon.

So just to clarify, as long as I/my kids have a combined saving(s)/investment(s) of £6000 or less, then my benefits won't be affected?

There are too many choices and many have little clauses, so based on your experience, can you give me recommendations as to which account(s) give a high return over the long term and with which bank/building society? I don't mind even online or locking it away, if it gives a good return for my daughter by the time she is 18yrs old.

I know that investments such as shares are risky, but a friend said banks for example are a good long term investment...According to them, RBS needs to hit £5 before the government can sell it and lloyds has already hit the minimum government's target of 75p.

Shares (in banks and so forth) may be a good long-term investment for people with larger sums and who know what they are doing, but for less than five thousand pounds you would lose so much in charges that this would not be a good move.

I think it a mistake to lock the money away until your daughter is 18. Her education over the next few years will affect the rest of her life, and money spent now, perhaps on school trips or on a tutor who enables her to pass a crucial exam, will give her greater benefit than money spent later.

alicewilliams

Thanks voyager2002. Don't quote me on this, but I think I am not allowed to spend money on her for things like school trips etc, without seeking court approval each time. As far as any trips go, I'd be happy to pay for them out of my own pocket.

By tutor, you mean a home-tutor, to help her with her grades? She is already one of the highest achievers at school, although it is a good idea, but the problem I have is then to find a trustworthy tutor.

If a tutor is not possible, then I want to put this money to use on her higher education ambitions.

McKneff

Its not a case of you not being allowed to spend the money on school trips etc.

This s what a parent would spend money on a child for anyway.

Just put her money away and forget about it.

alicewilliams

Thats why I started a thread on this forum...in the hope someone can recommend a high-interest savings account etc.

sulkisu

alicewilliams wrote: »

Thats why I started a thread on this forum...in the hope someone can recommend a high-interest savings account etc.

Have a look here
http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

Or try posting on the savings and investments board.