Money Moral Dilemma: Is it wrong to invest my children's savings in a property for them?

Everyquid

Investing in your children’s future is ALWAYS the right thing to do. Cash savings will be eroded by inflation and by the time they’re old enough to have that money, it’d be worth less than half now. Investing, however, for the long term produces better capital gains on the money. Now that part is out of the way…

The property thing will no doubt be tricky. I’m no expert, but won’t it be quite difficult to put the home in their name? Plus, putting all your eggs into one basket might not be the best idea for them. We all remember housing crashes I’m sure. Would it not be better to invest some of the money into a Junior ISA for the both of them and then spread the money into other ventures as well for diversification? Even a small amount (say 10%) in cash savings might be alright. Always worth a thought, but you’re making the right choice for your kids regardless and they’ll be incredibly grateful to you for it 😊

Keep_pedalling

badbackandsides said:

Brie said:

Wouldn't it also mess up any FTB status they might have?

i think what the person is really saying is "i have 3 buy to lets, i want another one". Is it ok to use my kids money to buy one and give them back the proceeds

No, the person is saying this is something we made up in the office as an MMD question.

For this to be a question of  morals this would have to be the hypothetical children’s money we are talking about not the hypothetical parent’s money. As minors cannot own property the only options open to hypothetical parent are to take the money and spend it on a house in their own name which is obviously not the moral thing to do, or put the money into a trust that purchases part of a property which will have major financial consequences down the line in that they would lose their FTB status. 

For such small sums of money there are far easier options to invest the money in liquid assets that are protected from tax. If this hypothetical parent really did want to keep all their snd their children’s eggs in one basket they could put the money in JISAs and only purchase property based funds.

tufftytoff

I have two children that I saved really hard for in cash and gave them control when they reached 18 (I thought they might buy a car or deposit for house) the youngest spent the whole lot on a motorbike that he cannot now afford to run and the eldest bought a very expensive phone which is becoming obsolete. So I would use  the savings to the best of your ability as sometimes we think our young people are money savvy and they are not. I hope this helps.

bikaga

I'd do it (on the assumption that when they're old enough you'll have some actual ££ for them and not "oh yeah, and here's a 5% share in a flat")

Spendless

tufftytoff said:

I have two children that I saved really hard for in cash and gave them control when they reached 18 (I thought they might buy a car or deposit for house) the youngest spent the whole lot on a motorbike that he cannot now afford to run and the eldest bought a very expensive phone which is becoming obsolete. So I would use  the savings to the best of your ability as sometimes we think our young people are money savvy and they are not. I hope this helps.

Often what our children think is a sensible spend isn't in parental eyes. I gave my son the money I'd saved for him when he went to Uni (amounted to under £2K) within a year he'd spent it on socialising. Now he's a bit older, 23, graduated, working in first f-time job  and getting married this year I asked him if he wished he'd kept it for something else, he said No, unknown to me he'd been bullied at school and what he really wanted when he left for Uni was a friendship circle using the money to go out and meet people enabled him to have that.  If what your kids have taken from the experience is don't blow money on phones or make sure you can afford to run a vehicle the money has probably bought them a good life lesson. 

doodling

Hi,

There are a number of things to bear in mind here:

1. It is the child's money, not, as some posters seem to claim , the parent's.  If you give someone something then you can't take it back without their permission (which they can't legally give you until they are 18).

2. There is a duty to look after that money in a sensible way, purchase of a single property carries significant risk compared to a more widely spread investment.

3. The children will be entitled to the money at 18.  Saying "when I sell that property that has a tenant Iin it you'll get your money" is not an acceptable answer, just as a bank saying you'll get your money when Joe Bloggs pays off his loan isn't an acceptable answer if you are trying to take money out if your bank account.  There needs to be a plan to be able to pay the children their money without delay when they are entitled to it and ask for it.

4. Presumably the children would be entitled to a share in any profits from the venture if you did go ahead - they are not just entitled to the increase in house value.  Make sure that is factored into the business plans.  Note that if the venture is highly geared then that entitlement might be significant, despite their investment being small.

If you can manage all the above issues then go ahead.  I'd probably go for a medium risk stock market investment instead however.

[Deleted User]

In your situation I would consult an IFA as there are tax implications to consider.  And remember tax avoidance is legal but tax evasion is illegal.

hairywalrus

[Deleted User] said:

In your situation I would consult an IFA as there are tax implications to consider.  And remember tax avoidance is legal but tax evasion is illegal.

Oh dear, no.  IFA's are terrible when it comes to tax - they invariably suggest referring to an accountant.

Yours,
A N Accountant.

DezMiller

Rather than ask us, ask your wife!

mvk0016

My parents were very frugal, and I had very little in terms of luxuries when I was growing up, but they did invest a big chunk of their money in flats that they rented out (all of this in Greece, if it had been in the UK I would be a millionaire now! :oP).

My father has passed away, and I have inherited 3 flats, with 2 more to come to me when my mother passes away. I am eternally grateful for their choice to do this, as it's a certain source of income, so I wouldn't hesitate. Your kids can always rent them out and collect an extra "salary" if they don't want to live in them or sell them.