Can we tell our child's benefactors which account to put cash in?

LXdaddy

JohnRo wrote: »

Well, given average inflation over the two decades about just over half the value or buying power of whatever money is put in to premium bonds now, barring any lucky wins.

Not really, Using the CPI for each November from 1997 to 2014, £100 deposited each birthday would now total £1,800. Obviously the 1997 £100 would have less buying power than it did back then - infact, comparing CPI for Nov 97 to Nov 14 just over £80. Each other year would have slightly higher buying power until this year's birthday present would have £100 of its buying power. The 18 £100s would in total have £1,574 of their original buying power.

Obviously it is possible to beat inflation - but even the cash depositied in Premium Bonds has not halved in value.

JohnRo

I did say over two decades. I'll admit, in recent years, the buying power being just over half is a bit of a stretch.

However we've had 6 years of financial repression and rigged money markets, pre financial crisis the long run average inflation figure was a good deal higher than of late and just how much real inflation is now hidden in official figures is also a considerable topic of debate as any grocery shopper will testify.

Try using those same simplistic CPI calcs pre 2007/8, not that normal service is likely to be resumed anytime soon, who knows what inflation will do to the buying power of bank tickets in the next few years.

http://www.measuringworth.com/

jamesd

First a complaint about MSE: was this intended as a Money Moral Dilemma post but posted without identification so that it would mislead us into believing that it was a genuine question by individuals? Please clearly identify such posts in future so that we are not misled.

MSE_Joanne wrote: »

a small child

In this reply I am assuming that you mean young child, not one with a medical condition which causes your child to be small. If this is not so please say more about why your child is small and whether there is any effect on life expectancy, notably any reduction in the chance of her living until she is 18 or increase in the chance of urgent need for money before that age.

MSE_Joanne wrote: »

premium bonds, which have a much lower chance of a return than we can get with the ISA

It is not true that premium Bonds purchased in this way have a lower chance of a return, let alone a much lower chance of return. Both have effectively identical chances of a return over the time periods involved, which I assume to be an intention that the child will hold them until they reach age 18. Over shorter periods it is certain that there will be a return from the savings account and chance dictates whether there is a return from the PBs.

MSE_Joanne wrote: »

We would prefer they pay the money into the account we set up as we feel it's our duty as her parents to get her the best return on her money while she is young.

You are not merely her parents. You are also acting as her trustees for this money and are obliged by law to act in her best interests.

MSE_Joanne wrote: »

Is it right for us to request the money they give is paid into the ISA?

No. You would be negligent in your duty as her trustees if you asked for money to be paid into a cash ISA or Premium Bonds. Neither of these is an appropriate long term investment for a child and you should instead be looking to use suitable investments within a stocks and shares ISA. Both cash and S&S are available within child ISAs.

It is understandable if you are more comfortable with guaranteed returns of savings accounts but as her trustees you must act in her best interests and not project your own low risk tolerance into her investment choices. Just in case you just didn't know the likely results, there is a greater than 99% chance of a single lump sum investment in a UK stock market tracker doing better than cash over the time period involved here, 18 years, 90% over just ten years.* Even over just five years there is a 75% chance of beating cash. These increase with regular investing. Historically returns have averaged just over 5% plus inflation.

You certainly can make the request of the grandparents and there are assorted issues with that but here I've concentrated on the misunderstandings in your own post, notably your misunderstanding of both probability and your legal duties as trustees of your child's money.

*Source: Equity Gilt Study, 2010, 2012 and probably all other recent ones

meknowalot-51

To "request" where the money should go is fine,discuss this with them and listen to there side of the situation.Do not "tell" them where to put the money as the last thing you want to do is upset the grandparents,remember this is a gift of their choice.They could have had over the years big payouts with premium bonds that your not aware of.I'm sure there are loads of different investments out there that could potentially give a larger return.After listening to you they could decide to invest in gold or antiques,how would you feel then?
I'm sure the isa chosen by you isn't the best form of savings out there,it's the one that your happiest with,nice and safe with a steady little return every year.
It's a present to their grandchildren which you should leave alone and respect.

ptrichardson

Lawlesswasp wrote: »

MSE Joanne
I noticed your posting purely by chance after opening my MSE regular email newsletter and stumbling across your posting.

So I incensed was I that I had to sign up and join the forum so I could reply!
Pardon me for saying this but I have never ever witnessed a more selfish self centred question before.

Your child's kind hearted generous Grandparents have chosen to give a generous gift to your child and all you can think of is getting the best return!!

What about the feelings of these nice Grandparents and as others have mentioned they may indeed take great pleasure in watching to see each week if the bonds have provided a win!


You chose to come onto a forum! To ask everyone what you should do, again as others suggest "Grow up" and speak to her Grandparents adult to adult although I know what I would do if you were to approach me!

Sorry but you seem like a fine example of what is wrong with our society today... Greed & Selfishness!

This is indeed a Moneysaving website, and we are all here to save money, but feelings matter far more than the odd few saved £'s

How is it self-centred and greedy to want the best outcome for your children?

I agree with you on many of your points, but to suggest the OP is being self-centred and/or greedy is simply false.

supergran40

Three Things come to mind here:
You have not been at all specific about the thoughts of the other parent on this matter. I suspect if the other parent thought it a good idea to broach the subject the job would have already been done. So you risk upsetting your spouse as well as your inlaws if you bash on.
My partner very generously opened an account for each of my grandchildren when they were born. I know he did not move the accounts around much but I knew better than to poke my nose in. He did make sure that they received the same final amount (only 2 years between). When they received the money, each was amazed and thrilled with the gift, as were the parents, who have always been impecunious.
Something which has not really been covered so far, possibly because it is potentially inflammatory, so I wish to make it very clear that I am not in any way casting any aspersions.
You wanted to save for your child’s future so you opened an ISA. You have the control of that money until the child is of an age to deal with it. You get to discuss with the child what happens to it.
The grandparents want to save to give a substantial gift when the child comes of age to make use of such an amount. They cannot open an ISA as you already did that so they have gone down another route. They are looking forward to giving the gift and discussing with the child how best to go forward with the money. They will get pleasure in helping the child to spend it.
If they put their gift in ‘your’ ISA it disappears in a pool. The significance of the gift and the pleasure of giving it are forfeit. This is why, if you do ask, the answer will be ‘no’. If you do not understand this and the special relationship between grandparent / grandchild then you will cause unnecessary and unhelpful hurt.