WWYD - Nephew spending life savings on day to day costs/ presents

[TurnThisStupidFatRatYellow]

This is a bit long, but don't want to drip feed.

Nephew is 21 years old. He works full time and has around £1200 after bills as spending money. He lives with his mother. He pays rent, phone, food, car insurance etc. The 1200 is after all expenses . We're very close.

He has £30k in life savings, partly due to an inheritance, but mostly due to his mother saving all his life, by making sacrifices and investing as well as she could for him. The intention for the money is for him to use it for something "proper" e.g deposit for his first house/go to uni / experiences if a life time/driving lessons etc. this is to get him out of the low income family situation my sister and I are in. She wants him to move out if the social housing and UC cycle. So has saved every spare pound for him. I am fortunate to have moved away from social housing and with my husband we're both working full time and have a modest mortgage etc.

The money is in my name, because he asked that at 18 he didn't have "direct" access to it.
I always told him I would give it to him without questions, as it's his money. He's been dipping into it for things like driving lessons and tests, a 3 month trip to Asia, a training course... all "proper" things.

He somehow manages to spend all of his £1200 on crap. Like Uber eats and the pub, taking his girlfriend out to cinema etc. It's all his money and he earns it and pays his bills. So who cares if he's spending it all? But it is relevant that he has more than enough spending money each month.
His girlfriend earns more than him,and pays £200 to her mother and ends up with about £1.8kna month. Which she seems to be able to spend just as easily as he does his money! She complains that she has to give her mum the £200. Nephew has never once complained not missed any payments.

He has now requested £1500 from these savings, to buy his girlfriend some presents (she's 19) from his savings. Because he "wants to spoil her". I have sent him his money, it is his after all, he's an adult, it's not for me to withhold it. I didn't ask him the reasons, he told me why without prompting.

Now, the WWYD is...

Would you "have a word" with him about spending money like this when it isn't supposed to be for him to fritter away on girlfriends/going out for a fancy meal... Especially as he has SO MUCH money each month spare. Or would you let it slide, and then if it happens again then say something? Or just hand it over every time?

I'm in a conundrum.

Cinema can easily be £15/20 a ticket

I think this is a very good idea.

I understand why it's not a good idea for him to have instant access to it.

At the same time, it's not necessarily risk free for you to hold it either.

As far as the law is concerned, it's your money.

What would happen if you lost your job and needed to claim benefits, for example? Could this £30k which is legally yours prevent you from claiming what you'd otherwise be entitled to?

The post you quoted clearly says LISA, which has a £4k limit

I actually have a MacBook from 2012 which refuses to die, even though I have otherwise broken up with Apple.

So arguably that isn't a bad use of his money, and what he's done with the other £6k seems pretty reasonable too.

I definitely would say something. Once the money is gone, it's gone.

Like you say, maybe you/he can earmark the majority for a house and the rest he can be a bit more flexible with but he really does need to learn how to manage his money.

(I was a nightmare at his age)

I just wanted to say you sound like a fabulous Auntie OP and your nephew is so lucky to have you!
I received some inheritance as a young adult at uni and had no idea what to do with it. My parents offered zero advice, despite being really frugal and money-savvy people, and so it slowly dripped out of the current account it sat in (I didn’t even put it in a savings account 😥) Yes, some of it was spent on wise things like training courses, but a lot of it was just spent as extra money towards fun things. Older adult me SO wishes I’d had a kind aunt like you who’d advised me how to keep it for my future! I’m fine and know how to budget now, but I feel like younger me screwed over older me by not saving that money for a deposit and made getting on the housing ladder way harder than it could have been. So keep going OP, your approach is obviously working because your nephew trusts you, so trust your gut!

Can you talk to him about his disposable
income? He is frittering away £14k+ a year after his bills are paid. He should be taking advantage of living fairly cheaply at home to save and add to the nest egg he’s been given, not dipping into it.
As his mum I would be furious if he spent money I’d scrimped for on his girlfriend!

I would sit hom down and have a conversation about how he has this money and how you beleive he is mismanaging it. I'd ask him to reflect on what I've saud and come back to me in a week - then he gets money into his own account or I put it into a longer term savings account (at least a year). Make it clear you just want to help him.

I’d chat to him about spending habits and maybe direct him to some resources. I’d also hand the money back as maybe when he sees it actually going down himself, he’s less likely to spend it.

Rather than ‘having a word’ how about planning to sit down the two of you some time and have a chat about what his plans are.

He asked you to help him with it, and you’re keen to do that, but to do it well you need to understand what he wants.

Is it all house deposit. Is it half house deposit and half other investment in life things. Is it to top up day to day spending (hopefully answers no to that one).
Assuming he does say no to that one, can then move on to how he avoids finding himself wanting to use some of it for that. Some egs. Estimating present spend per year and putting it into quick access savings each month so that get a bit of interest in the interim and know that house / life investment money does go on it.

Rather than the ‘ I don’t think you should’ work the angle ‘what do you want from it’.

What does his girlfriend do that she is taking home £2000 a month at 19?

Because presumably then it would need to be in his name, perhaps OP already has her own ISA she contributes to or doesn’t feel comfortable opening one in her name for someone else’s money.

Get him to see a financial advisor. They’re best placed to advise on how he should invest it for maximum growth.

Maybe he’s going to propose?!

I think that when I was 21 I thought money was for spending. I had no concept of pensions or the future! I lived from payday to payday - I didn't think it would ever stop!

Whilst you should encourage him to save, he may not listen until he is much older (I suspect I wouldn't have! 🤪)

I would remind him that his mum saved every penny of this money to help him into adult life and not hand over anymore for transient things.

Why hasn’t his mum got control of the cash? Why leave it for you to decide? Doesn’t seem fair, you will either be blamed by him for keeping what is his from him or blamed by his mum for letting him piss it up the wall, metaphorically.

WWYD- hand control of it back to his mum and let them thrash it out between themselves.

I think you need to do the job he asked you and help him not to fritter the money.

What is the point of him giving it to you to look after if you hand it over with no questions?

Get him to explain and justify why he needs the money and why it should come from this pot. Impose a cooling off or notice period. Consider saying you don't think it is a good use of his money or suggesting an alternative. While you are correct, it is his money, and you can't stop him spending it as he wishes he asked you to help him manage it and trusted you to challenge him.

Definitely help him set up a rainy day fund and improve his money management in general, as others have suggested. When he has some savings, he will have less need to dip into this fund.

It's a really bad idea to have his money in your name OP. For instance, what if something happens to you? He might have problems accessing the money. What if youe marriage failed? Your ex could have a claim on it. What if you find yourself needing to claim benefits? It could affect your claims.

There's not much you can do really apart from have a chat, but why on earth has his mum gifted him £20'000?? Why not keep that back, or transfer it to you if she needed it out of her name, and just give it to him as and when he needs things (not wants things). Like driving lessons, car, house deposit etc. It seems like his mum has bought him up to be shit at money and then let him loose with it all.. what did she think was going to happen?

I think it is quite common though, we grew up poor and one of my sisters went on to make good money, she spoilt her kids rotten and not one of them knows the value of money now, they spend it like water.

I would show him a compound interest savings calculator, money savings expert savings info or something like the Donegan's free course (Rebel Finance). I wish I'd started saving when I was so young! I would say he has enough income to start adding to his savings rather then diminishing it. For example 20,000 plus adding £200 a month over 10 years (invested) could be around 100k. Over 20 years 300k, and over 30 years (retire at 50?) 800k. Compound interest is magical! Another way to look at it is the Rebel Finance equation for money spent each month vs invested. Say he's spending 500 a month he doesn't need to, if he invested that instead it could be worth 100k in ten years even without the starting 20k.

Is it in your name to stop him from being over £16k? If not then you should tell him you will just transfer the whole lot over. You shouldn't have to be embroiled in his financial affairs. Unless he is genuinely lacking intellectual capacity. Which he clearly isn't.

By all means give him some actual meaningful advice about saving and investing. Try and avoid blame and saying you feel you disapprove of his lifestyle. But I think in the long term it's best if you wash your hands of the responsibility.

If he mismanages it while you're still 'in charge' he could give you a world of ball ache when/if he feels his money has 'vanished'. I've seen this happen before when my parents took on a trust for a friend. They deeply regretted it and had to quit.

Your nephew has almost £40 per day for disposable income.
As well as other budgetary suggestions above, one example you could suggest is he could choose to save say £10 per day.
So £300 per month
That would be 5 months of his savings - equivalent - that he would be giving his girlfriend…..might give him pause for thought
As well as saving for a mortgage, he might like to save towards a holiday.