Mid-term investment for a 17 year old. Ideas?

Encarpus

My father has given to me, for my son, £2,000 to give to him when he buys his first home.  My father does not expect to be alive when my son buys his first home, so this sum needs to be tucked away somewhere safe for at least 5 years.  I don't really want my son to know about it.  The gift is something my father did for each of my daughters to help furnish their first homes, and when my son gets to the same event in his life, my father (my son's grandfather, in case this is getting confusing) would like to be remembered for the gift.  So, any ideas?  

El_Torro

Given the situation it's probably best to keep it in your own name. 

If you don't think your son will buy a house in the next 10 years then investing it is a good option. Best to put it in an ISA (again, in your own name, therefore using up your ISA allowance) and invest it somewhere sensible. It should generate a greater return than keeping the money in cash, especially if invested for 10 years or more.

If you do want to keep it in cash then there aren't many good options unfortunately. Even long term fixes won't give you a return as high as 1% annually. You could put it in Premium Bonds (assuming you don't already have the maximum allowed yourself) but the chances of it winning 1 prize in any given year are low. Also if you already have some of your own Premium Bonds how do you distinguish the winnings of "your" Bonds versus your son's Bonds? 

xylophone

Give it to your son when he can open a LISA? (Age 18).
https://www.moneysavingexpert.com/savings/lifetime-isas/

Malthusian

Encarpus said:

My father has given to me, for my son, £2,000 to give to him when he buys his first home.  My father does not expect to be alive when my son buys his first home, so this sum needs to be tucked away somewhere safe for at least 5 years.  I don't really want my son to know about it.

You need to be clear between you and your father that the gift was to you unconditionally, and the idea of giving it to your son when he wants to buy his first home is just a non-binding wish. If he is giving the money to your son, with you looking after it as trustee, you should arguably hand it over when he turns 18. (This is assuming English / Welsh law applies - if Scots law applies he is already an adult and it would be simpler for your father to give him the money directly.) At the very least he would need to know about it at 18 due to the risk of inadvertant benefit / tax fraud if he owns money he isn't aware of.

If the money is yours then there's no particular need for the son to know about this money, any more than he knows about the rest of your finances. You can still hold it in a separate account as a mental earmark without him acquiring ownership until you want him to.

As others have said, as the money is to be used to buy a real asset in 5+ years time, it would make sense to invest it. Otherwise the house he will eventually buy will be rising in price while the money to buy it with loses value.

Encarpus

Thank you.  You've dug out the nub of the matter with great insight.  Handing over the money at age 18 is not the plan.  It's a gift to be made when my son has a home and needs to furnish.  It could be given to help with the initial deposit on a home and that will be at my discretion.  He doesn't need to know about it and in fact that is my father's wish - until he needs it.