To ask for help with financial pickle

[ShoebillStork]

In 2009 FIL had a win on the Premium Bonds. He gave us £10,000 to invest for DS (at low risk) and the money to be given to DS when he's 18.

I put the money towards a loft conversion. DS is 18 soon and I'm due to remortgage for a better rate. How much do I need to release for him so he gets the £10k plus what it might have gained in interest since 2009.

And should I encourage DS to get a Help to Buy ISA with it?

Link it to the increase in property value in your area in that time, as that is what benefit you have gained from investing it in your own property. Eg if you live in London, that money would easily have doubled since 2009 or as much as tripled depending on the area.

You can work it out by looking at the property valuations on rightmove etc.

You need to work out the value of the house before and after the loft conversion, calculate the change in value, work out the proportionate value allocated to the 10k and then add 12 years interest on top

This. A relative of mine works in wealth management and says anything less than double (ideally £25k from £10k in 2009 was suggested as about typical) and you are mugging off your son based on fund values since then.

OP, I don't think you've done the wrong thing by using the money to invest in your DS's home.

I do think you're not as savvy as you'd like to think, given you now have to remortgage to realise that investment.

You've had 12 years of small mortgage and a knowledge that this day is coming; why haven't you saved for this?

(And I'd suggest £15k-£18k for your son's nest egg).

Cannot believe all the people thinking inflation is good enough.

Any investment that achieves only inflation would get a fund manager fired! Most investment funds would expect to comfortably exceed inflation. Inflation just means the money isn't worth less after the time, an actual investment earns a return above and beyond inflation.

@MichelleScarn

Because I've paid the fucking mortgage whilst he's sat on his arse playing X box

Is this not similar for most parents with a child at home?

This, my parents never "invested" the money given to them for me and DSis while we were children

@ShoebillStork Can you assign DS a proportion of house value, commensurate with the £10k investment, at house value at the time of investment, then give him an amount at 18, then the rest in trust/deed of variation in your will? Then he will receive the rest of the value of the £10k invested in your property when he’s older.

You've only had 12 years to research this!!!

I was referring to Lifetime ISAs.

And the Daily Mail wouldn't be interested as I've not said how much the house is worth

You're making this too complicated.

Give him 15k. Offer advice on how to invest but be prepared for him to ignore it. He might want it for training or travel etc.

If you're worried about him not contributing, ask for a sum to cover his costs in the house.

Fine that you chose to invest the £10k in your property, but you now need to give your son that £10k plus whatever rate/value your property has increased by.
Not as if you had invested in a low rate ISA.
At least be honest and give him his honest share of the actual investment. Not the promise of inheritance one day.
You weren’t quite honest with your fil when given the money to invest, now you seem to want to shy away from giving your son his fair share of the investment you did actually make.
Sounds like you want to have your cake and eat it.

Dear god... I simply do not get Mumsnet today! Who are you people? I don’t know anyone like you in real life? OP you did what was best for your family ad your son has a great room to himself and will now get his lump sum. How anyone thinks there is an issue with this isn’t beyond me. Go with the average interest and put it in an ISA for your son. Job done and don’t think any more about it.

I'm sure you do like the idea of rounding what you owe down to £14k but as I said if you had put it in a low risk cash ISA it would have been worth over £16k with no management fee. Also the money was given you to invest FOR HIM and you chose to do that by investing it in to your house, which is fine as long as he gets the proper return on his investment. If your house was worth £50k before his money was invested in the loft conversion and £60k after then his investment represents 16.5% of the property value. By rights he should be due that percentage of the current value unless you're planning to deduct rent for the years he used the room. The fact you intend him to inherit the house eventually is irrelevant because you can't guarantee there will be anything to inherit if you end up needing care in your old age. Either his money was invested in the house ( without his or the fil's consent but a savvy investment ) and he gets the proper return, or it was a loan from him to help you maximise your property value and you need to ensure he receives at least the minimum he would have if his money had been invested as the giver instructed you to do. My guess is the amount he would have available if it had been invested in an ISA will give the lowest figure so be the most acceptable and affordable for you.

Don't round it down, that's just tight. Give him the £15k.

Some of these responses make me laugh! OP has invested very wisely on behalf of her son (as directed by the grandfather) and made her son a good deal of interest whilst acting as a his 'fund manager'.

How is investing in property directly any different from putting the money in a bank or savings account? Do some of you think that when you put money in a bank it just sits in a vault waiting for you to withdraw it... ??

That money gets invested by the bank into ventures such as... an individual loaning money from that bank to... do a loft conversion for example. That's how the capital gains interest.

Suggesting that the OP has defrauded her son in some way is ridiculous. Investments take many forms- traditional bank accounts, stocks and shares, art, property, etc. OP had a great investment opportunity and took it. Property investment of this type is typically low risk and hight reward - as evidenced by the outcome and interest it has made.

OP, if you want to be completely accurate and equitable, you might look at how some property funds have performed over the time period in question and calculate a figure from that. This would be a proportion of the interest made - similar to how property fund managers would pay a proportion, factoring in their costs and payment.

Before doing anything, I'd talk to your son and ascertain his wishes over where he plans to invest this money going forward. Leaving it where it is may be the best financial option and the option he wishes to choose when the money becomes his. Seems like you have got it invested in a cracking 'fund' at the moment which may continue to perform well for your son. Seems pointless to withdraw it to put it in an inferior investment opportunity. In ten years time, he may choose to release his equity from your property to buy his own home - it may well be worth much more than his original 10k stake and set him up beautifully.

Perhaps take this as an opportunity to teach him the various investment options available- the risks and benefits of each, map out some best and worst case financial projections of each option and let him decide. They important thing is that he gets to decide (with your guidance) and have autonomy over where his capital is invested. You've made excellent decisions with it so far - hopefully he will follow your excellent financial decisions and make good choices.

Good luck!

Don’t beat yourself up, I would explain to your son what you did and explain what you are going to do.

ShoeBillHorn - I think you are very realistic and that you are very reasonable, love this comment “ Because I've paid the fucking mortgage whilst he's sat on his arse playing X box in his very cool loft conversion with his own bathroom! “

@NoIDontWatchLoveIsland

You need to work out the value of the house before and after the loft conversion, calculate the change in value, work out the proportionate value allocated to the 10k and then add 12 years interest on top

This. A relative of mine works in wealth management and says anything less than double (ideally £25k from £10k in 2009 was suggested as about typical) and you are mugging off your son based on fund values since then.

I work in wealth management and that’s absolute bollocks

this is hilarious (sorry OP)!.

Honestly, neither party would know about you borrowing the 10k, so I do not get what the big deal is.

I also would not give an 18 year old 10k either, I like the idea of giving him 3k and putting the rest in a help to buy/save/Lisa whatever.
If hes going to uni he might blow the lot?

I don’t think investment in property is wrong in any way. Ds will get an appropriate return as his grandfather intended. My only quibble is the exclusion of dss as it is presumably his grandfather too. I think the parents should try to create some funding for him too.

It’s not the fact op “invested” this money in the house (which could have gone tits up but that’s another post) it’s the sheer contempt in the way she talks about paying him back “get his grubby little hands on it” “he’s not getting that much!!!” “I’ll round it down and take a few as management”. HIS money has enabled you to gain a significant difference in living situation, added interest on your property and it seems like she’s almost resentful in the fact that she has to add interest onto the money she “invested” and annoyed that it’s coming out of her pocket. Add onto the “he’s sat on his arse playing x box for years while I payed the mortgage” comment, it doesn’t even sound like she likes her son.

Maybe he should use whatever crumbs you throw at him to get the fuck away from your toxicity.

Why didn't you ask FIL at the time it it was OK to do this? If you knew it would not go down well, it seems really dodgy that you took his money and did what you wanted with it! The money wasn't for you to do what you wanted

FML these responses!!

He is her son not a business partner. I'm sure she's given him lots of things over the years and the £10k plus realistic interest will be just fine. The very idea of a stupidly complex calculation based on his share of the investment is totally insane.

@NCnotmyusualone

You are taking the p*ss. His investment (because that is what it is, despite his lack of permission) has been in your property, which has skyrocketed by your own admission. You can’t cut his ten grand out and add a wee bit of interest when it’s the home improvement he financed that has added a considerable value to your property.

You are genuinely a cheeky (grabby, selfish) fucker.

On what basis did he make an investment in the property and not a loan?

You are genuinely a cheeky (grabby, selfish) fucker

I honestly can't believe what I have just read. Take a moment to calm yourself down would you?

You effectively stole his money. OK, so you intend to pay it back, but your behaviour is inexcusable