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?

[Dollywilde]

In fairness if the housing market had crashed that would have been OP’s gamble not paying off and she could have taken out a £10k loan to repay DS - a loan she could have taken out for the loft anyway. So she’s covered. I’d give DS what it would have cost to take out a 10k loan at the time, because for all intents and purposes that has DS getting his investment back and OP paying what she would have done if she’d borrowed the money from a bank. So I’d go with £13k.

One point to bear in mind is that FIL may be suspicious if the amount DS gets is much more than the average return from an ISA! So I wouldn’t be too generous or he might ask questions...

[Nancydrawn]

Yes, I'd say at least £20k is fair. The stock market boomed during those years, so if you had put it in a reasonable FTSE fund, which I assume you would have, you'd be at least at £20k.

The actual fairest thing to do would be to treat the real estate like the actual investment and calculate how much the house has grown in worth, by percentage, and then add that percentage on top. So, if the house is worth double what it was in 2009, then you give him £20k. Honestly, it might work out to be less than that, unless you're in a particularly red-hot district.

You've enriched yourself from a gift that wasn't meant to be used by you. The least you could do would be to be very generous indeed. I actually don't know the legal dimensions of this.

[AutoGroup]

You could pay him a similar yield to if it had been invested in a rental property. Generally considered to be c. 5-8%

[30degreesandmeltinghere]

If fil was that arsed about his 10 k he could have invested it himself and left the proceeds to dgs when he popped his clogs...
He trusted op. And she has imo come good for her ds...
She has hardly spent it on shoes and handbags ffs
..

[ShoebillStork]

@TatianaBis

Did FIL also give SS 10k?

Nope. FIL views my DSS as a not so "youthful indiscretion" on the part of my DP and sadly has never acknowledged him.

[ivfgottwins]

So you stole it and made money off it for yourself since it contributed to the uplift in your house value? 🤔

[LadyMacbethWasMisunderstood]

To keep pace with inflation you would need to pay £13,750. Hopefully, if invested you’d have done a bit better than that. £15,000 seems fair.

There probability is no need to ‘fess up provided you get on and re-mortgage right away. I do think you were wrong to spend his money as you did. There was never any guarantee that you’d be able to re-mortgage when the time came. But that is not what you are asking.

[MichelleScarn]

Why are his hands "grubby" OP?

[moonbedazzled]

Lighten up. The OP's just being flippant for comedy effect. Of course she's going to do right by her son.

[bewilderedhedgehog]

The OP was given £10k to invest. Unless I have misunderstood, the FIL did not specify where. She invested in housing and is now planning to give her son the money. There is nothing to see here! Had she taken the money with no intention to repay etc that would be a different matter but she has invested it! I do think she should carefully look at interest rates to understand a fair increase.

[ScarlettDarling]

@ivfgottwins

So you stole it and made money off it for yourself since it contributed to the uplift in your house value? 🤔

Don’t be ridiculous, she didn’t steal the money! The money was invested and the op is giving it to her son when he turns 18 with a fair amount of interest.

[MysteriousMonkey]

Unlike some others on this thread I 100% think you did the right thing! You bettered DS life by making him his own room and basically made the money work. Now you can pay it back, as you suggested, with the interest it would have got in an ISA and everyone is more than happy. Am so bewildered by some people!

My children inherited a bit of money a few years ago which we needed. They were a little older (8 up) but were more than happy for me to borrow it. As with yours, it helped make everyone's lives at home a bit better!

[hitsvilleuk]

£15-20 K sounds right
All the handwringing - bloody hell. Another low risk investment would have made very little.
Agree its a win win and if the housing market had collapsed then the OP would still have had to pay up.

[OverTheRubicon]

@Mumoftwoinprimary

Interest rates have been very low since 2009. If you were really impressive and kept completely on top of switching then you might be able to get 2% - 3%. I’d go for 3% as your son has unwittingly taken r more risk than if the money was in the building society.

10,000 * 1.03^12 = £14,257.61.

Agree with your maths more than the others here! Average return on a FTSE index stocks and shares Isa would also come out nearish 3% over that period so works well.

blog.moneyfarm.com/en/isas/cash-isa-vs-stocks-and-shares-isa-a-10-year-study/

[SeaShoreGalore]

Bet you’re glad you asked now

[lalafafa]

@ShoebillStork

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

God no, he's not getting that much! The value of the house has sky rocketted! I just need to work out how much it would be worth if I'd bunged it in a Junior ISA or something lame!

You're making me howl, love your style. Your son has already enjoyed his 10k with his cool bedroom.

[ejhhhhh]

😕 I'd be inclined to give DSS some money from the remortgage too then. And for simplicity I'd just use an interest rate of about 1% in your calculations. Interest rates have not been great since 2009, and that's the sort of rate a cash account (fulfilling the low risk criteria) would yield.

[RobynNora]

OP, we must share a similar parenting philosophy as I don’t see what the big deal about this is either 😂 You spent the money in the expectation you’d give it back and are researching fair rates of interest. The money went on a family home and it’s not as though you buggered off to Tuscany with it. No harm. No idea about interest though but maybe follow a FTSE tracker. Easy to see historic returns and figure it out.

[blubberyboo]

I think the best you might have achieved on a low risk child ISA over 12 years is about 4%, so about £16100

I don’t recommend holding onto the money longer now your son is an adult as life can bring many variables that lead to him not getting the money if you have a change of circumstances.

[Looneytune253]

If grandpa asked you to invest it for him you have to give him more than 10k plus interest. A proportion of the rise in house value does seem fair. Not sure why you've dismissed it straight away. It was meant as an investment for ds and there should be a return on that investment

[PracticingPerson]

Nope. FIL views my DSS as a not so "youthful indiscretion" on the part of my DP and sadly has never acknowledged him.

That's not good

The money seems rather tainted, won't it drive a wedge between the two of them?

[Shodan]

It seems to me that your DS will benefit thrice from the way you invested the money OP:-

1. The cool new bedroom he has been enjoying
   
2. The 10k plus interest (whatever you work it out to be) when he is 18
   3)His eventual inheritance, which will be significantly more than it would otherwise have been.
   
   Of course, you could have just stuck the money in a savings account, in which case your DS would only have got the 10k plus interest. No nice bedroom, no larger inheritance. I expect he'll forgive you your trespasses, should you ever decide to confess your heinous crime...

[JassyRadlett]

You realise a loan interest rate is always much higher than a savings interest rate?

That’s the point. If the £10k wasn’t invested in the house, then it was loaned to OP by her son. She’s now paying it back, so loan interest is more appropriate than savings interest.

[itsasmallworldafterall]

Just tell FIL you put it in premium bonds, then you can add on whatever you think depending on how lucky you think your son would have been. FIL can't criticise your choice of investment as it he had them and they worked out well for him.

[ShoebillStork]

People on these threads are crazy. Your son would've never been able to invest £10k in a property at the age of 6. You not only facilitated a sound investment but also gave him a lovely bedroom which I'm sure you could've used for yourself if you were the asshole some of these posters are making you out to be.

@meadowbreeze is officially my favourite Mumsnetter