Advice on how to deal with large gift

MummyD

Hi. I’m hoping for a bit of advice.

Background. My husband and I have two children at private school. PIL currently very generously fund the fees for this. They are downsizing their house this year and are giving each of their children a lump sum of around £150,000 to do with what they want. They won’t be funding any fees going forwards so we will be using a chunk of ours to finish off the children’s education. 

Child 1: One year left so say £17k
Child 2: Four years left but has a scholarship so fees lower - say £60k all in allowing for inflation. Total say round up to £80k that we’ll need to access over the next 4 years. 

Both children will go to university so we can maybe use some of the lump sum to help with that although we can fund it from our salaries if necessary. Child 1 will go to uni in 2024 and child 2 in 2027. 

We also have £21.5k in premium bonds which we had mentally set aside for uni help. 

How should we split up the lump sum and save or invest it? I have a S&s Isa (tiny amount in it) but husband doesn’t. No debt and no mortgage so we don’t need to consider that. 

Any help and suggestions gratefully received. 

Thanks. 

Linton

For the £80K needed in the next 4 years, keep it in cash, perhaps in fixed term savings accounts of appropriate durations.

Do you have an emergency cash fund of say 6 months living expenses to cover boiler breakdowns, loss of jobs etc etc?  If not you should set one up in addition to the money you plan to use to help your children at uni.

If you have no short/medium term plans to use the rest it would be sensible to invest it.  Increasing your pensions could be worthwhile way of doing this.

Owen1991

Personally I wouldn’t fund the university fees as it’s only paid back dependent on what they earn afterwards (may pay back less than the amount to go to university).
They will need help with the maintenance/living loan however whilst at uni.

House deposits when required would seem like a better option to get them on the property ladder in my opinion. 

artyboy

MummyD said:

Hi. I’m hoping for a bit of advice.

Background. My husband and I have two children at private school. PIL currently very generously fund the fees for this. They are downsizing their house this year and are giving each of their children a lump sum of around £150,000 to do with what they want. They won’t be funding any fees going forwards so we will be using a chunk of ours to finish off the children’s education. 

Child 1: One year left so say £17k
Child 2: Four years left but has a scholarship so fees lower - say £60k all in allowing for inflation. Total say round up to £80k that we’ll need to access over the next 4 years. 

Both children will go to university so we can maybe use some of the lump sum to help with that although we can fund it from our salaries if necessary. Child 1 will go to uni in 2024 and child 2 in 2027. 

We also have £21.5k in premium bonds which we had mentally set aside for uni help. 

How should we split up the lump sum and save or invest it? I have a S&s Isa (tiny amount in it) but husband doesn’t. No debt and no mortgage so we don’t need to consider that. 

Any help and suggestions gratefully received. 

Thanks. 

Just felt the need to pick out that part... how on earth can you be sure? My younger one at 17 (so also a 2024 entrant) has suddenly decided she'd rather do a finance apprenticeship because she'd be getting paid to do a degree and already likes the money she gets from her part time job. And we're talking a straight A student here... mind you, the 'elite' apprenticeships are at least as hard to get as a good Uni place.

So unless this is part of your own grand plan for them, things may well change, and at relatively short notice!

Incidentally, I'm in the relative minority here that if they do go to Uni, and you have the means available, then you might as well pay for their fees and accommodation/living costs - it's an investment in their future and an effective bit of forward estate planning...

jimjames

Owen1991 said:

Personally I wouldn’t fund the university fees as it’s only paid back dependent on what they earn afterwards (may pay back less than the amount to go to university). 

It depends what you mean by "fees", when mine went the loan didn't even cover their accommodation costs so we had to fund the difference and their living costs on top. I agree I wouldn't be paying the tuition fees

waveneygnome

one thing to investigate:  if you are certain that the children will remain at the same private school........ask the burser/finance department if there is a discount for paying yearly up front, or even 2-3 yrs up front.  Friends of ours got 15% discount for this.....which at the time interest rates were hovering around 1% ...... was a good use of their funds.

MummyD

Thanks everyone for your comments. 

@artyboy - I’m pretty sure child 1 will go in 2024 - there aren’t very many apprenticeships in astrophysics! Otherwise that might have been a good route for him. 

Child 2 is also science focussed. Or classics. Or languages. She’s not sure but loves studying so I’d be surprised if she didn’t want to go either. 

When I said fees I didn’t mean their tuition, just topping up their maintenance loan or replacing it entirely if we can. 

It’s more whether it is worth splitting the money into 1 year, 2 year 5 year fixed bonds for example then some into Isas, a bit into pension etc that I’m struggling with. 

waveneygnome

Oh, and don’t forget to thank the in-laws!

Albermarle

artyboy said:

MummyD said:

Hi. I’m hoping for a bit of advice.

Background. My husband and I have two children at private school. PIL currently very generously fund the fees for this. They are downsizing their house this year and are giving each of their children a lump sum of around £150,000 to do with what they want. They won’t be funding any fees going forwards so we will be using a chunk of ours to finish off the children’s education. 

Child 1: One year left so say £17k
Child 2: Four years left but has a scholarship so fees lower - say £60k all in allowing for inflation. Total say round up to £80k that we’ll need to access over the next 4 years. 

Both children will go to university so we can maybe use some of the lump sum to help with that although we can fund it from our salaries if necessary. Child 1 will go to uni in 2024 and child 2 in 2027. 

We also have £21.5k in premium bonds which we had mentally set aside for uni help. 

How should we split up the lump sum and save or invest it? I have a S&s Isa (tiny amount in it) but husband doesn’t. No debt and no mortgage so we don’t need to consider that. 

Any help and suggestions gratefully received. 

Thanks. 

Just felt the need to pick out that part... how on earth can you be sure? My younger one at 17 (so also a 2024 entrant) has suddenly decided she'd rather do a finance apprenticeship because she'd be getting paid to do a degree and already likes the money she gets from her part time job. And we're talking a straight A student here... mind you, the 'elite' apprenticeships are at least as hard to get as a good Uni place.

So unless this is part of your own grand plan for them, things may well change, and at relatively short notice!

Incidentally, I'm in the relative minority here that if they do go to Uni, and you have the means available, then you might as well pay for their fees and accommodation/living costs - it's an investment in their future and an effective bit of forward estate planning...

I agree that plans for children do not always work out just the way you would like them to.

However paying for the tuition fees, for Uni, is not good financial planning. The reason being is that the majority of students never have to pay the loan back in full, or at all in some cases.
The only time it may be a good idea, is that if you are reasonably sure that the student will quickly become a high earner when they leave Uni. So for example if they have very good A levels and then go for a hard subject in a in demand industry. Like Engineering or IT.

You will still probably have to help them with accommodation etc as other posters have mentioned .

Student loans: the truth about uni fees, loans & grants - MSE (moneysavingexpert.com)

Linton

MummyD said:

Thanks everyone for your comments. 

@artyboy - I’m pretty sure child 1 will go in 2024 - there aren’t very many apprenticeships in astrophysics! Otherwise that might have been a good route for him. 

Child 2 is also science focussed. Or classics. Or languages. She’s not sure but loves studying so I’d be surprised if she didn’t want to go either. 

When I said fees I didn’t mean their tuition, just topping up their maintenance loan or replacing it entirely if we can. 

It’s more whether it is worth splitting the money into 1 year, 2 year 5 year fixed bonds for example then some into Isas, a bit into pension etc that I’m struggling with. 

As said in my post #2

Why struggling?  You dont want to take any short term risks with money needed in the near future.  But if you dont invest money which is not needed in the near future you could well have lost out to inflation by the time you do need it.