My child is not ready to receive their Child Trust Fund (CTF) - What next?

Exodi

This is exactly the reason whenever someone asks about savings account for their (often newborn) child, I suggest saving the money in the parents name (if you're expecting to accumulate more than a couple hundred pounds, and I appreciate this might not be appropriate for cash gifts from other people). That way you can guarantee the money will be used towards a good cause like driving lessons, a car, a deposit on a house, etc.

I would love to live a Utopian world where 18 years are renowned for their financial management skills and prudence, but unfortunately every 18 year old I know typically winds up spaffing the money on takeaways for breakfast, lunch and dinner, nights out every weekend, designer outfits, taxis everywhere, etc.

But I know this a controversial view and this forum has mixed opinions on this subject, and usually when it comes up we see people suggesting that 18 year olds can be responsible and use their own angelic children as an example, or suggesting that if (when) they put the money up the wall, it'll act as a good lesson. Personally I'd rather they wasted a few hundred and learned a cheap lesson, than raced through £8k that I spent their lifetime saving for them.

Unfortunately for the OP, it is too late, all you can do is try and impress on them to be sensible with the money, but I feel realistically that'll go in one ear and out the other. Maybe super early on when they first get access to it you could ask if they'd like you to keep half for safe keeping to go towards their first car or something - my mother did, and in hindsight I'm glad this happened, predictably, I absolutely raced through the money I had available to me (and then some in payday loans) but was still able to have lessons/get a car.

powerspowers said:

Don’t talk about owning a house, that’s too distant and £8k isn’t going to make a difference.

Average house price is £268k, 10% deposit would be £26.8k, which then translates to two people earning about £30k to raise the mortgage. Assuming they each go halves on the deposit, the OP then puts the £8k in a LISA over two years, they'd have £10k out of the £13.4k deposit they'd need without putting in a penny themselves - it definitely would make a notable difference.

Don't get me wrong, I don't think there's any chance of convincing an 18 year old to not spend a penny of the £8k they've just been given to use towards a potential house purchase many years in the future.

Kim_13

Exodi said:

This is exactly the reason whenever someone asks about savings account for their (often newborn) child, I suggest saving the money in the parents name (if you're expecting to accumulate more than a couple hundred pounds, and I appreciate this might not be appropriate for cash gifts from other people). That way you can guarantee the money will be used towards a good cause like driving lessons, a car, a deposit on a house, etc.

I would love to live a Utopian world where 18 years are renowned for their financial management skills and prudence, but unfortunately every 18 year old I know typically winds up spaffing the money on takeaways for breakfast, lunch and dinner, weekly nights out, designer outfits, taxis everywhere, etc.

But I know this a controversial view and this forum has mixed opinions on this subject, and usually when it comes up we see people suggesting that 18 year olds can be responsible and use their own angelic children as an example, or suggesting that if (when) they put the money up the wall, it'll act as a good lesson. Personally I'd rather they wasted a few hundred and learned a cheap lesson, than raced through £8k that I spent their lifetime saving for them.

Unfortunately for the OP, it is too late, all you can do is try and impress on them to be sensible with the money, but I feel realistically that'll go in one ear and out the other. Maybe super early on when they first get access to it you could ask if they'd like you to keep half for safe keeping to go towards their first car or something - my mother did, and in hindsight I'm glad this happened, predictably, I absolutely raced through the money I had available to me (and then some in payday loans) but was still able to have lessons/get a car.

powerspowers said:

Don’t talk about owning a house, that’s too distant and £8k isn’t going to make a difference.

Average house price is £268k, 10% deposit would be £26.8k, which then translates to two people earning about £30k to raise the mortgage. Assuming they each go halves on the deposit £8k, the OP then puts the £8k in a LISA over two years, they'd have £10k out of the £13.4k deposit they'd need - it definitely does make a difference.

Don't get me wrong, I don't think there's any chance of convincing an 18 year old to not spend a penny of the £8k they've just been given to use towards a potential house purchases many years in the future, but it's not a negligible amount of money and certain would make a difference to a house purchase.

I can see the logic of saving in an account in the child’s name at birth - then it can’t be required to be used first should the parent need to claim a means tested benefit later. But it should be possible to know whether the child is a spender or a saver before an amount like £8k is reached, and begin saving in the name of the parent(s) at that time, so that the bulk of the money is safe and a smaller proportion only (that in the child’s name) might be a lesson to the child if they do indeed blow it.

I inherited £6k at 16 and thankfully was more of a saver than a spender. My parents suggested that I save £5k and spend £1k which I pretty much did (my computer and had broken and my DVD player was on its last legs so I replaced the PC and bought a VCR/DVD/HDD combi.) Perhaps Premium Bonds weren’t the best place to put it, but it did stop me dipping into it when I had a spendy period in my early 20s. I still have that £5k block of bonds to this day and see it as a further gift when they win.

Exodi

Kim_13 said:
I can see the logic of saving in an account in the child’s name at birth - then it can’t be required to be used first should the parent need to claim a means tested benefit later. But it should be possible to know whether the child is a spender or a saver before an amount like £8k is reached, and begin saving in the name of the parent(s) at that time, so that the bulk of the money is safe and a smaller proportion only (that in the child’s name) might be a lesson to the child if they do indeed blow it.

The part about means tested benefits is perfectly valid and you're right, it should certainly be considered.

Assuming that is not a consideration, the risk is, by the time a parent might be able to draw a conclusion of whether the child is a spender or saver, they're not far off 18 anyway. The OP backs this up by suggesting that this change in spending habits is recent due to being of an impressionable age and compounded by the pressures of college and working. Assuming linear contributions to get to the £8k figure in the OP, even if the OP could conclude that the child would likely blow it at 16, at that point they'd already have over £7k in the child's name. 

Saving in your child's name from birth really is just crossing your fingers and praying on the fact that your child will be good with money when they turn 18. I don't really want to get into parenting, but I'd remind the OP has suggested that they provided financial education over many conversations.

Just being realistic here, 18 years are notoriously frivolous with money when they reach adulthood. Of course, I've no doubt some children exist that aren't (mostly children of MSE forum members whenever this topic comes up).

Kim_13 said:
I inherited £6k at 16 and thankfully was more of a saver than a spender. My parents suggested that I save £5k and spend £1k which I pretty much did (my computer and had broken and my DVD player was on its last legs so I replaced the PC and bought a VCR/DVD/HDD combi.) Perhaps Premium Bonds weren’t the best place to put it, but it did stop me dipping into it when I had a spendy period in my early 20s. I still have that £5k block of bonds to this day and see it as a further gift when they win.

I think your use of premium bonds is quite clever (as it causes reluctance to miss a draw), and is in a similar vein to why I suggested the OP quickly asks whether the child wants them to hold on to some of the money - to create an obstacle between part of the money. The child is likely to find it harder to race through all of the money if they need to keep asking the parent to dip into it, or the guilt of trying to ask for it to waste instead of put towards a meaningful purchase.

Nonetheless the second part of going through a 'spendy period' is kind of my point (and don't get me wrong, I'm not judging you, so did I, I think most people do).

Kim_13

Exodi said:

Kim_13 said:
I can see the logic of saving in an account in the child’s name at birth - then it can’t be required to be used first should the parent need to claim a means tested benefit later. But it should be possible to know whether the child is a spender or a saver before an amount like £8k is reached, and begin saving in the name of the parent(s) at that time, so that the bulk of the money is safe and a smaller proportion only (that in the child’s name) might be a lesson to the child if they do indeed blow it.

The part about means tested benefits is perfectly valid and you're right, it should certainly be considered.

Assuming that is not a consideration, the risk is, by the time a parent might be able to draw a conclusion of whether the child is a spender or saver, they're not far off 18 anyway. The OP backs this up by suggesting that this change in spending habits is recent due to being of an impressionable age and compounded by the pressures of college and working. Assuming linear contributions to get to the £8k figure in the OP, even if the OP could conclude that the child would likely blow it at 16, at that point they'd already have over £7k in the child's name. 

Saving in your child's name from birth really is just crossing your fingers and praying on the fact that your child will be good with money when they turn 18. I don't really want to get into parenting, but I'd remind the OP has suggested that they provided financial education over many conversations.

Just being realistic here, 18 years are notoriously frivolous with money when they reach adulthood. Of course, I've no doubt some children exist that aren't (mostly children of MSE forum members whenever this topic comes up).

Kim_13 said:
I inherited £6k at 16 and thankfully was more of a saver than a spender. My parents suggested that I save £5k and spend £1k which I pretty much did (my computer and had broken and my DVD player was on its last legs so I replaced the PC and bought a VCR/DVD/HDD combi.) Perhaps Premium Bonds weren’t the best place to put it, but it did stop me dipping into it when I had a spendy period in my early 20s. I still have that £5k block of bonds to this day and see it as a further gift when they win.

I think your use of premium bonds is quite clever (as it causes reluctance to miss a draw), and is in a similar vein to why I suggested the OP quickly asks whether the child wants them to hold on to some of the money - to create an obstacle between part of the money. The child is likely to find it harder to race through all of the money if they need to keep asking the parent to dip into it, or the guilt of trying to ask for it to waste instead of put towards a meaningful purchase.

Nonetheless the second part of going through a 'spendy period' is kind of my point (and don't get me wrong, I'm not judging you, so did I, I think most people do).

Indeed, I mentioned it only as Premium Bonds are generally viewed as not the best on here if people are holding sums like £5K (though the limit was £30k then so I was holding 1/6 of the limit rather than the 1/10 it would be now) and are not taxpayers. I won £50 with those bonds on the first qualifying draw and then very little until I increased my holding to closer to the maximum as an adult. Against that, I ask myself whether my 16 year old self would have been able to play the Regular Saver game (and some accounts are minimum age 18 anyway.) 

I had a standard savings account opened for me at age 8 and wasn’t very good with that (local branch and the rate wasn’t great, whereas nowadays the best deals more likely to convince a child that it is worth saving can be had by going to a comparison site.)

I’ve always assumed that the person that left me that money must have made a judgement that I wouldn’t blow it all at 16 (as 18 or 21 would have been a more usual stipulation.) But then they could have changed the gift or age at any time had they had cause for concern, whereas the choice can’t be reversed once money is in an account in a child’s name. Perhaps the best thing for anyone reading who is looking to start saving for a child is to only save in a child’s name up to an amount you’d be comfortable to see them fritter if the worst were to happen.

cloud_dog

As with pretty much everything in life, it is rarely black and white.  Perhaps a bit of everything is the best option.

Ours aren't perfect but they know that when it is gone, it is gone.

The only comment I would make for the OP is that I took the complete opposite view with money they earned for themselves, e.g. they worked for it and earned it, so if they wanted to waste it friviously then that was fine by me.  This started with the money they earned from doing stuff round the house.  If they chose to waste it on junk, so be it.  But when they then had nothing left, they had to wait until they earned dome more.

trickydicky14

I recall having a post office savings account with a paying in book when I was under 10 years of age. I got great joy going to the post office every week to pay in my pocket money, I'm no different now in my habits 60 years later.
Can I say, I no longer use the Post Office.

artyboy

Being the financial car crash that I was in my youth has made me the more sensible, clued up, and comfortably off person that I am today.

Doesn't work for everyone of course, but sometimes you have to be irresponsible before you can become responsible...

Spendless

I understand this and was the reason we saved separately for ours (one of mine was too old for the CTF anyway which made it that we had to sort things out in a diff way to treat them both  fairly). Mine spent the Government money she received (£250 at  birth, £250 when 7 plus interest, not a penny added to it) on a hol with her then boyfriend. 

I can say you haven't a prayer of keeping this quiet. My daughter was the first school year to receive it and  asked us about it. She will hear from her peers who get theirs or from SM. From memory though it doesn't just 'turn up' she will be written to about it.

You've put that you dabble in property and she's also seen her older sibling struggle with buying. Might this be an 'in' if you can talk about LISAs and how they work and let that conversation develop that she has a chunk coming to her some of which could go into one?   

Bigwheels1111

I never had anything like this when I turned 18.
But I would have just spent it asap. No idea about money and responsibilities.

At 21, I was seeing a 34 year old ex ballet dancer ( my Mums best friend ).
Lucky me 
I went through thousands and thousands of pounds entertaining her, wine, food, nightclubs etc.
As soon as I earned it I spent it. 
Not a care in the world.
Was I happy I will let you judge.

I’ve grown up since then.
Saved for a house, purchased as 32 years old, paid off at 43.

You never know which way life will take you.
But most of us learn the hard way.

Good luck with your child.