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?

depends what you might have invested it in - the stock market or a cash ISA or similar. They might have very different return rates.

Agree with mumoftwo at an average of 3% interest over 12 years £14,257

But she didn't put it in a savings account or similar. She used it to improve the value of the home.
The person whose money it was should reap the rewards of their investment.

Maybe look into a LISA (lifetime ISA) as I think they can offer better than Help to Buy ISA terms. Not sure though.

I can't see that the op has done anything wrong at all. Both ds and dss have benefitted vicariously from the investment for 10 years and the capital has been used wisely for their benefit.

I think you should now discuss what your son needs and the amount should be £14,257.61 as noted above. It would be wise, provided it's not needed for uni costs to invest it until he is 25. Frankly interest rates are so low at the moment I'd take a punt and whack it back into premium bonds pro-tem.

(DS) will inherit the lot when I croak. Which will be very soon if FIL finds out ...

But if it was such a worthwhile idea, surely FIL would have seen its merits?

And if it wasn't, why do it at all?

Proportionate increase of value of house that can be attributed to attic, as that is how it was actually invested. Not some imaginary ISA.

I'm sorry OP but this is disgraceful.

You stole 10 thousand pounds from your own son?!! You knew is was wrong which is why you don't want anyone to find out. Calling it your "savvy investment" is awful. Even talking about your son getting his "grubby hands" on his own money.

I can't believe what I'm reading.

@TatianaBis

So DS got a new room and 10k cash + interest. It’s win win.

If you’re in the SE investing that 10k in property would yield far more than sitting in an ISA over that period.

The people telling you you did a bad thing are twits.

Yeah but she is keeping most of the capital gain to herself. If she invested in the house then she needs to give her son his % of the gain. She can’t have it both ways.

This is fraud. Appalling behaviour OP. Please don't try to wrap it up as 'for DS' You stole it to add value to YOUR house!

I’ve suggested she adds the % increase in the property to 10k. That’s fair.

well this is interesting.

www.thisismoney.co.uk/money/saving/article-9189585/A-lost-decade-Cash-Isa-savers-inflation-outstrips-interest.html

@PattyPan

Unless DS is going to buy within the next year (which I’m guessing is unlikely given his age) then a Lifetime ISA would be better than HtB. You can’t put £10k straight into either of them so it would need to be fed from another ISA or savings account over a couple of years.

Thanks, yes, Lifetime Isa is what I meant (not Right to Buy).

So if I allow £15k (£10k from FIL + £5k interest) then I can give him £3k now cos he wants to buy a car, then feed the remaining £12k into a Lifetime Isa over 3 years and the Government will add £1k per year. That about right?

And no snippy answers required as I've not researched it fully yet!

I was gonna say about 13k-14k

Ds's home which he benefits from having. And will inherit thus getting his 10 k investment twice over surely?? Very smart move actually op...

I agree with the people who have said that £20,000 would be a fair amount to give your son, @ShoebillStork - his investment in the home has probably increased in value more than that, looking at it as a percentage of the house’s value then compared to now.

So if I allow £15k (£10k from FIL + £5k interest) then I can give him £3k now cos he wants to buy a car, then feed the remaining £12k into a Lifetime Isa over 3 years and the Government will add £1k per year. That about right?

Correct I think LISAs are great - DP and I used them to buy our house and the government bonuses really helped.

People on this thread are batshit. Yes it was wrong of OP to use the money but it was still spent on DS and gave him better sleeping conditions. It will have upped the value of their property and now is giving the money back plus the interest it would have gained in a low risk account!

Avoid help to buy at all costs though! If DS decides to use it on a property and is certain of that choice I'd put the £10k in (You can put in £4000 each year) a lifetime ISA for the 25% bonus. The rest can be uni costs, or an emergency fund etc.

@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!

But you invested in something that has had a great rate of return - surely the only way you would be keeping to FIL's wishes (rather than merely stealing from your child) would be to give him exactly that - the full sum of the return on his unwitting investment?

@PerciphonePuma

This is fraud. Appalling behaviour OP. Please don't try to wrap it up as 'for DS' You stole it to add value to YOUR house!

It’s not fraud and it’s not stealing

Don’t use big words you don’t understand the meaning of
Honestly, some of the batshit posts on this thread

I don't know if this link is any good showing previous interest rates? Could you work it out from that?
www.tescobank.com/savings/previous-interest-rates/

You want to know what a bog standard investment would have yielded. But it wasn't a bog standard investment - he invested in your property. So if the return is greater, you have to give him that. You can't have it both ways.

I'd do this...

1 What was the value of the house when DS invested his 10k? Let's say it was 200k.

2 Work out what 10k was as a % of value then. In this scenario it's 5%.

3 what is the value of house now? Maybe it's 300k.

4 His 5% of 300k is 15k. Give him that.

Obviously the figures will differ, but the % needs to be the same.

Personally, I think what you did was fine, but you have to pay the correct return in his investment.

Id say £15k.

If your FIL wanted it invested for ds he should have invested it for ds.

Your ds is getting the £10k back plus interest he would have got if you put the money in an isa to start with and he got to live a better lifestyle than he would if you had put it in an isa in the first place.

I'd tell ds the full story. Doubt he's going to think you made the wrong choice if he gets the same amount of money either way at 18 and got tk have a nice bedroom.

@PleaseReferToMeAsBritneySpears

You want to know what a bog standard investment would have yielded. But it wasn't a bog standard investment - he invested in your property. So if the return is greater, you have to give him that. You can't have it both ways.

I'd do this...

1 What was the value of the house when DS invested his 10k? Let's say it was 200k.

2 Work out what 10k was as a % of value then. In this scenario it's 5%.

3 what is the value of house now? Maybe it's 300k.

4 His 5% of 300k is 15k. Give him that.

Obviously the figures will differ, but the % needs to be the same.

Personally, I think what you did was fine, but you have to pay the correct return in his investment.

That’s not how investment returns work 🤦‍♀️🤦‍♀️

@ShoebillStork What you have done is a very shady, and wrong, and you must be incredibly obtuse if you don't think so!

And the posters calling people drama queens, 'hard of thinking,' and 'pearl clutchers,' can bore off. People are entitled to views different to you and the OP you know, so just do one eh, with your sanctimonious put-downs towards people who think the OP is wrong in what she did!

And I was on the fence until you said 'OMG he is not getting THAT much!' (A certain % of the value of the house.) But now I think you're very unreasonable, and a bit obnoxious! Why does he not deserve it? You used HIS money to add value to your house. You've got a nerve!

Some might think he deserves it seeing as how you used HIS money, without HIS permission. It's cheeky as fuck at best, and yeah, fraud and theft at worst.

If it was me, I would be honest and tell him what you did, then open an ISA for him, put £15,000 in it, and make it so he can't touch the money until he is 21. Maybe even 25. He doesn't need the money at 18. He will need it more at 21, but will be a bit more sensible with it at 25. And it will have 7 years to accrue interest.

And FFS don't steal borrow his money again!

Hopefully, the FIL never finds out!

And I seriously can't believe there are some posters on here, who are obtuse enough to actually think there is nothing wrong with what the OP did! FFS! she didn't even ask first! She took someone else's money! 'Oh but she is putting it back now!' a few posters cry. FFS, shall we all just take money from our family members, or our employers, and keep it for TWELVE years, whilst we add value to our home, and then give it back when it suits us..... ???

Yeah right. Coz THAT won't end up with a charge for theft against us will it?!

This fucking place sometimes.