Fairness between Children 3 February at 11:07AM in Savings & investments 14 replies 1.1K views

MX5huggy

I have 2 children, the eldest was given money at birth. Old uncle, grandparents etc Even by the Government (CTF). The second child not so much. The last 2 years I have been levelling up. So today the eldest has £3075 the youngest £2590 I put £100 per month into the  youngest account. Both are invested in VG ESG Dev World All Cap in JISA’s. There’s a 4 year age gap. I will stop the £100 when they are of “equal” value. But what is equal value?

The aim is not that they receive the same at 18 (the younger would loose due to inflation, given equal investment performance). But that they have equal chance of receiving the same. 

I can’t use the total invested originally for child 1 because a. I don’t really know how much it was and b. Child 2 didn’t have the benefit of 7 years of growth before I started the £100 a month. 

If we divide the investments by their ages the eldest (13) has £236 per year the youngest (9) £287. So the younger is winning?

If we say average growth is 5% Going forward the eldest gets £3925 the younger £4018. At 18.

How would you sort this? 

Once they are even the £100 is going back to my Salary Sacrifice pension where is worth £147 straight away. 

MikeJXE

You can't do anything about evening things up, all you can do is to satisfy your own feelings of whats fair. 

I have 2 sons 8 years between them 4 grandkids 12 14 15 and 22 years old 

I worked out how long my savings would keep me and decided I had a bit too much and didn't need it all so I gave each of them £10,000 Christmas 21 

They are happy and so am I 

kaMelo

Stop overthinking it, there is no correct answer. In my own situation they all ended up with similar amounts, not to the penny but close enough despite the age gaps.

 Rather than focus on who got what they will probably be grateful they got what they did.

Sea_Shell

Does your typical 18 yr old really understand inflation and growth?

Or do they just see £4000 ?    Would they see anything else as "unfair"?   

At least you're trying to be fair.     

TiVo_Lad

You would probably drive yourself crazy trying to work out what's fair in terms of initial investment, inflation, market performance etc. IMHO you are fair by giving them the same amount. The rest is timing and "luck".

Alternatively, you decide to give them a fixed amount (say £5K) on their 18th Birthday. Your job is to come up with a strategy where you'll have £5K to give them when the time comes. If you have any excess you either put that in your pension as a thank you for being a great parent, or you add it on as a bonus.

You might adjust the younger one's payout for inflation so the "value" is the same.

Hermann

Possibly a bit of overthinking going on here.

Rather than this degree of analysis of their JISA amounts it'd probably be better to be focused on them growing up to be well rounded individuals who are not so self entitled that they analyse their JISA and conclude they have been hard done by and financially mistreated by their family. 

There is a risk that the example you're setting by this level of 'fairness' is in fact drifting into being a role model that contributes to creating self entitlement and dissatisfaction.

Contributions to the JISA should ideally be any surplus left after your own pension payments. You shouldn't be 'levelling up' children's savings at the expense of your own financial security.

Exodi

This is one of the reasons I wouldn't consider individual investments earmarked for specific children. I'd invest the money in my own name and divvy it up as appropriate (probably an equal amount + inflation, where I'd make up any difference in investment returns if needed).

Unfortunately even if they were born 1 year apart and you had contributed exactly the same amount to the penny into each of their S&S ISA's - there's still the potential that the last year for the last child is a disaster.

I don't know how I could reasonably sit my 18 year old child down and say "Right timmy, as you may know, I gave your brother the money from his investments on his 18th birthday last year and obviously he was ecstatic to use the £20ish odd grand on a deposit for a new house.

Unfortunately, because US equities closed out 2022 with the biggest annual drop since 2008, due to a combination of aggressive rate hikes to curb inflation, fears of recession, obviously the Russian-Ukraine war and concerns over COVID in China.

While you may not understand what any of that means, what is important to you is that you only have 16k. Welcome to life Timmy."

Ciprico

Exodi said:

This is one of the reasons I wouldn't consider individual investments earmarked for specific children. I'd invest the money in my own name and divvy it up as appropriate (probably an equal amount + inflation, where I'd make up any difference in investment returns if needed).

This has all kinds of negative tax and potential IHT issues.....

MX5huggy

Interesting, no one has any particularly strong views on a good way to make this fair from the current position. 

I’m not overthinking it, but if I can throw a bit of maths at it I will, I would feel confident in my choice. I don’t expect any issue with there being a difference at 18 if it can be justified by markets, the 4 year gap maybe helps compared with 1 year gap. 

Don’t worry my financial future is not dependent on £100 a month for 2 years. 

The whole “fair” thing is misnomer really I’ll do the best for each of them as individuals as required. 

Sea_Shell

What's the adage around fairness....

Fairness of opportunity, not necessarily fairness of outcome.   (or something like that)

So you could say that if each child had the same value, in £££, saved for them, then that is fair.   What inflation or the markets do with that money is down to luck and timing.


As for treating them as "individuals".    That's fine, but be careful that you don't go too far.    Like a house deposit for one, or a car, etc etc. at the exclusion of the other.    That is likely to cause resentment IMO. 

Bigwheels1111

You can’t win whatever you do, my brother would scream and shout that I had more beans than him on my dinner.
Save the money, give it to them at 18, job done.
If they are not happy with the amount kick them out of the house, let them live in the real world where life is not fair.