Creating a passive income from £300k for daughter?

dunstonh

eskbanker said:

silvermum said:

The thinking on the income generated from her savings and investments is to create funding for her to launch her career. In the early days it's typical for artists to have to outlay reasonable amounts, work for free, fund their own shows, join professional organisations, attend events etc. Let's say she wanted to budget £10k for this - £500 month on-going and £4000 to self-fund her projects?

If the £4K is a one-off and the remaining £296K only needs to yield about 2% per year, that should be readily achievable without taking much risk.

You say it should be readily achievable without taking much risk, but for how long?
2% p.a. plus 4.7% for inflation means needing 6.7% p.a.     

eskbanker

dunstonh said:

eskbanker said:

silvermum said:

The thinking on the income generated from her savings and investments is to create funding for her to launch her career. In the early days it's typical for artists to have to outlay reasonable amounts, work for free, fund their own shows, join professional organisations, attend events etc. Let's say she wanted to budget £10k for this - £500 month on-going and £4000 to self-fund her projects?

If the £4K is a one-off and the remaining £296K only needs to yield about 2% per year, that should be readily achievable without taking much risk.

You say it should be readily achievable without taking much risk, but for how long?
2% p.a. plus 4.7% for inflation means needing 6.7% p.a.     

True, but OP's expressed requirement was "best way to generate a small income from this without reducing the capital value too much" so it'll come down to whether this should be interpreted as real-terms value or simply absolute value - as you say, keeping pace with inflation is more ambitious target but the impression given was that this is to be a relatively short term plan while the daughter's career is established, although OP didn't answer your question about timescale....

Bostonerimus1

I'd set up a savings bond ladder and take dividends and capital gains from a global equity index fund. That's a strategy for a more tactical solution there's need for more information.

silvermum

In terms of timing, let's say over a 3-5 year time period with regular reviews, at least annually?

I suppose in that time it should become clear whether she has what it takes to make a career in the industry, and if, indeed, it's still what she wants? Also a chance to see if she can become self-sufficient in income terms.

silvermum

dunstonh said:

eskbanker said:

silvermum said:

The thinking on the income generated from her savings and investments is to create funding for her to launch her career. In the early days it's typical for artists to have to outlay reasonable amounts, work for free, fund their own shows, join professional organisations, attend events etc. Let's say she wanted to budget £10k for this - £500 month on-going and £4000 to self-fund her projects?

If the £4K is a one-off and the remaining £296K only needs to yield about 2% per year, that should be readily achievable without taking much risk.

You say it should be readily achievable without taking much risk, but for how long?
2% p.a. plus 4.7% for inflation means needing 6.7% p.a.     

Can I ask which figures you're using for inflation here? I thought it had fallen in recent months? Is this a 12 month average?

dunstonh

silvermum said:

dunstonh said:

eskbanker said:

silvermum said:

The thinking on the income generated from her savings and investments is to create funding for her to launch her career. In the early days it's typical for artists to have to outlay reasonable amounts, work for free, fund their own shows, join professional organisations, attend events etc. Let's say she wanted to budget £10k for this - £500 month on-going and £4000 to self-fund her projects?

If the £4K is a one-off and the remaining £296K only needs to yield about 2% per year, that should be readily achievable without taking much risk.

You say it should be readily achievable without taking much risk, but for how long?
2% p.a. plus 4.7% for inflation means needing 6.7% p.a.     

Can I ask which figures you're using for inflation here? I thought it had fallen in recent months? Is this a 12 month average?

It's the long-term average over the last 70 years.

Inflation tends to be relatively low and then suffer periodic shocks. Using short term inflation rates for planning can lead to a false sense of security when those shocks come along.

theoretica

Another way of looking at it, which I find works better for me, is dividing up the sum.  Eg 250k invested to buy a house in more than five years time, 15k for significant wants (eg a car + insurance, major holiday, wedding, whatever!) 15k invested in career development costs and 20k in living expenses. Probably different numbers for her situation. That way one portion is invested separate to hopefully appreciate, and another portion to be budgeted to be spent over time. This gives a clear view of when there is the endpoint and it is time to rethink how things are going and may reduce the risk of unnoticed overspending and creep.

Bigwheels1111

I went down the route of 5 & 7 year fixed rate accounts, paid anually.

As a low earner, carers allowance £4268.80.

I can earn £18,570 - £4268.80 = £14.301.20 of interest before tax.

The issue is when she starts work.

Unless its a very small wage she will pay Tax on most of it.

But 80% of it is better than nothing.

As of today she could fix £160k, 80k in two 5 year fixed rates at 4.40%, interest paid away anually £3,520 from each.

£7,040 a year is not to bad.

cloud_dog

@silvermum, there has been lots of discussions on the technicalities of how to possibly provide what you have enquired about, but what is your daughters position on her inheritance?

Is the inheritance being held in trust?

silvermum

cloud_dog said:

@silvermum, there has been lots of discussions on the technicalities of how to possibly provide what you have enquired about, but what is your daughters position on her inheritance?

Is the inheritance being held in trust?

No, no longer held in any form of trust, so once the proceeds from the house sale are in she will have full access to it.
In reality she always comes to us for discussion and advice and we make decisions together as we have been managing her finances with her for a number of years.