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.

I had to do this after a death in the family, I held the money for myself and two other people in an account that I opened just for that, it's perfectly fine to do it, you just have to make sure you have a valid will, it was written into mine that if I died the amount of money in that account (and the account was named) would be shared equally between the two people who it was for.

The only problem you will have is if you have debts as that money would technically form part of your estate.

The easiest way to get round it would to be a joint account between OP and her nephew, but with both as signatories for withdrawals, that way if OP died, it would go straight to her nephew under survivorship rules and wouldn't form part of her estate.

Have a word with him if you want but I suspect that the very reason he is making slightly less than sensible decisions is precisely because he isn't in charge - you are. He's relying on you to ensure he doesn't totally squander it all and he may be leaning on you too much in that regard. He'll have to make his own mistakes at some point. If he was 18 I might think you being in control was sensible, but at 21 he has to have some personal responsibility, surely? However, that's not the bit that would concern me the most - is this all in your name, with no legal document to state it belongs to him? What if something happens to you? Where does it go then? And further, as PP mentioned, if at some point he wants to move out and his independence doesn't mean buying a house but renting and maybe being eligible for benefits of some kind - then what? You couldn't keep in excess of £24K above the threshold for savings in your name, and syphon amounts off to him, without declaring it.

Agree, there must be something of this ilk behind the arrangement. Op could equally get caught out if there were a dispute. Most nt 21 yo manage their own finances and learn from mistakes.

Where do you have the money? Is it in a proper savings account? £30k is over £1000 in interest a year, but you will be paying tax on anything over £1000 interest. It would be smarter to put the money in a good ISA so it's not taxed. That way he'll be making money that he can spend without touching the capital. Get him to open an ISA now and put £16k in it and then he can open another in April to put in what is left after paying into the LISA. He can then keep adding to it himself.

I think you should suggest a five year ISA where he can't touch it. Then by the time he can access it he will be older. He will regret frittering it away. You can get some seriously good interest rates at the moment. He will make lots of extra money from it and he can pretend he doesn't have it for a bit and take it out of the equation. If he is spending to keep up with his girlfriend he will have nothing.

He’s asked you to have it for a reason so I would have the chat.

I would point out that he’s asked for 5% of the account total to spend on his girlfriend and see if he understands this.

good luck - it’s lovely you’ve stepped up to help

Are you keeping the interest his money is earning for yourself? He should have more than £30k left even after taking £7.5k.

I would be asking him why he needs to spend so much on his gf (maybe he's taking her away for a weekend or a holiday) and perhaps suggest that if he really likes her, he could perhaps save the money as he might want to buy her an engagement ring in a few years time or get their first place together. I bet that he's paying pretty nominal rent and not things like council tax, so i would go through how much he earns and see whether he can afford to move out of home. When he realises how tough it actually is out there, he may well change his tune.

How rude, of course I'm not taking his interest... How appalling that you would accuse me of stealing his money.

These are ballpark figures.

He's earned some interest, but the money is just in a standard easy access account earning maybe 3%? His choice. I have previously encouraged him before to move it to a higher interest rate account, but he said no. The most he's decided is the LISA.

Yes it is.

Because my sister didn't scrimp and save all his life for nothing.

She went without a hell of a lot for 17+ years and worked hard to earn the money.

She wants to get him out of the UC and social housing cycle. This way he stands a chance of buying a property and not taking up a council flat.

Well, he asked me to look after it. That's him managing his finances as much as he can.

He's got a lot to think about.
We had a chat just this weekend, he wants to buy property,but he doesn't know how to go about it, or where to buy... So I'm going to help him with the first few steps.

So he is also getting uc? Surely you are not teaching him much by offering handouts and holding onto his savings. Where do his wages go?

If I die, it will all go back to him. It's in my will.

Oh, this is a good idea about the joint account.

Put it in a better account then. 3% is crap. What bank even is that? He's losing money to the tax man on that interest which is already crap. Or rather you should be paying tax on it as it is in your name.

She is and will be, probably all her life.
She can't work full time for health reasons. She can't get a mortgage.

I would, but he doesn't want to move it at the moment. Because he doesn't understand. Because he's overwhelmed. Which is why I'm trying to help him.

But at the end of the day, it is his decision..

It WAS him that asked to move it.

It was all in his name the day he turned 18 and he had access. He asked me to look after it, because he didn't want to have direct access to it.
He could have kept the money,and spent it all by now.

No he's not getting UC at present. He's working full time. But he wouldn't be able to buy a property for a very long time without this lump sum in savings.

It was always in his name, in a child savings account that he had total access/control of the day he turned 18. Fairly standard.

What do you mean? Open a better account in your name and move the money. You can get a 4.7% easy access. You'll still have to pay tax on the interest but at least he will be making more interest than now.