Not to share out Premium Bond winnings?

[Dolphining]

A few months ago, my 2 DCs and I each inherited a five-figure sum of money from my grandmother. I've put the money into Premium Bonds (in the UK). To be clear: there are three accounts, each with an equal amount of money in. One is mine, one is DC1s and one is DC2s. For those who might not know, Premium Bonds pay out monthly prizes instead of interest. Prizes start at £25 and there are two monthly jackpots of £1m.

So far, we all tend to win something every month, which is great! Given the nature of Premium Bonds, we are winning different amounts each month. The money is paid out into savings accounts, not reinvested in more bonds.

DH and I were chatting about this at the weekend. (DH is DF to the DCs.) DH thinks I should be splitting the winnings equally between us each month rather than letting one child win/earn more than the other. He thinks both DCs should be treated equally and that all winnings should come to me, and I give a third to each DC. On the face of it, this seems fair and the obvious thing to do. The winnings seem to even out over time, but for example this month DC2 has won four prizes but DC1 has won none.

However, I thought about it a bit more and I'm not so sure this is the right thing to do. My Premium Bonds are in my name, DC1s in their name and DC2s in their name. I don't think I have the right to have DCs winnings paid into my account and to redistribute them according to how I see fit. I think it could technically be theft unless the DCs consented to this arrangement. DCs are 14 and 11, so arguably have the capacity to do so, but you could also say that it's coercion. This is more of a legal point.

My second reservation is more moral. It doesn't feel so important to me with smaller winnings, but what if one of us wins the £1m jackpot? It sounds awful, but if I won £1m I wouldn't necessarily want to split it three ways with my kids right now, and I think if I were to die within 7 years there would be IHT implications (as the money would have been a gift from me). At this stage in my life I would want DH to inherit, and he would take care of the DC. But then what if one child won £1m? I wouldn't expect a share, but how awful would it be to have one millionaire DC and one with "just" a uni fund? This sounds like such a first world problem and likely to remain hypothetical, but I now feel that I need to come to some agreement with the DCs on how (if at all) we split the winnings. And how long should this arrangement last? Forever, or until turning 18, or until we agree to end it? What if DC2 (11) agrees to split £1m now, but as an adult thinks that in hindsight they didn't have the mental capacity to make this decision and we have a big family fallout?

On balance, I think each of us should just keep their own winnings. AIBU?

So you are concerned it's theft to take away if one wins big but not concerned to potentially put one child very well off and the other not out of just pure luck?

This.
You have yours and I would invest the kids in your dh's name or something and reinvest in bonds. At 16 or 18 or whatever take it out and split it so they can choose what to do.
I still remember the bitterness I felt as a kid when my sister won £100 on bonds - my grandparents bought us each something like £5 worth.

I think I'd put the winnings into a pot to be distributed at a time when both DC are older.

OP why did you put the DCs money into premium bonds?

I'm with PP - why on earth wouldn't you put the money in a proper high interest bank account (there will be a lot more of them around soon with rates rising) or reputable investment fund?!?! Everyone earns the same, no one develops a taste for gambling. Have you compared the amount you are "winning" with the earnings or capital appreciation on a normal investment vehicle?

I'm not from the U.K. though so the whole idea of Premium Bonds seems absolutely nuts to me. Are they really a legitimate product?

I'm concerned about both eventualities! See my OP. Hence the dilemma.

@Whinge see my reply to NoseyNellie at 14:50

I don’t think you need to worry about one of them winning the jackpot PB OP, I have had premium bonds for many years and have never won a prize worth more than £25 in all that time, there have been odd months when I have won three £25 amounts but a three figure or above win has always eluded me. Sigh.

...even if it's a million pounds.

@SummerInSun see my reply to NoseyNellie at 14:50. And yes, the earnings on the Premium Bonds have exceeded what I would have got in a bank account, and what I think I would have got on the stock market (on the basis of my ISA and pension pot, which have lost quite a lot of value).

And yes, Premium Bonds are legitimate. Operated by an institution owned by the UK Government.

Plus one to those calling for a proper investment. Whilst premium bonds are 'safe', they don't even keep up with inflation. In a low to medium risk investment portfolio you would netting 2-3 percent growth a year and compounding interest would dramatically grow the value of the funds.

Depending on how old your kids are properly invested the value of the funds should be growing by 5-10 percent a year.

I was fortunate that when my granddad passed away he left me 1500 in his will which was to be Invested explicitly in a fund of his choosing. I could claim it once I turned 18, in 9 years it grew from 1500 to 5400 with no additional contributions.

I will never understand why people save with banks or NS and I, unless they need quick access and can't afford to keep the money locked away for a period of time. The returns are frankly abysmal.

In the event of either child winning 1 million, it should be split 50/50. Or any substantial amount tbh.

Smaller prizes they keep for themselves.

YABU.

You made the decision on behalf of you presumably under-age children If you had invested in ISAs for example or other stocks/shares etc, you would all be receiving the same rate of return.

I don’t think you have a leg to stand on ethically with your DCs’ accounts. Maybe your own is a different matter.

And yes, I agree with PP that Premium Bonds are not necessarily the wisest investment. A stocks and shares ISA tracker would give you a far better and more regular return

Just googled it out of curiosity. Martin Lewis doesn't agree - chances of winning are really low and most people win nothing www.moneysavingexpert.com/savings/premium-bonds/

I suspect we will have this situation too... my elderly grandmother has left money to my daughter, but I am currently pregnant with no2 (and we could potentially have a third), and also the first cousin to have children so it doesn't seem fair really.

Sell the DCs premium bonds. Put them into something like a stocks & shares ISA or equivalent.

I would say each child keeps what they win. But then I've never won more than £25 (since it went down from £50).

I guess if one won the million £ prize it could get awkward, although life isn't fair.

When I was a kid and our nan gave us some each, the deal was that we'd share out winnings.

Then once we got to adulthood, we agreed to just keep anything (not much as very little money in bonds, maybe £25 every couple of years between all of us - which felt a lot as a child admittedly)

So you decided for them?

Your youngest is only 11. A 5 figure inheritence has the potential to grow quite significantly by the time they're an adult. But instead you decided to go with PB meaning this month they recieved nothing, and the same could be true for many months in the next several years.

I'm surprised you didn't allow them to seek independent financial advice on the best way to invest thier inheritance.

Mine are mine alone. My children have agreed they'll share prizes and don't want to know who won it, so I split their winnings equally between them.

I would say that anything under £1000 stays with the individual. Anything over that gets split because it's a "big" win. The odds of this ever happening are tiny too.

One friend shared equally all money between the two siblings. They earned quite a bit, but different amounts, as child/tween models. My friend invested their money, and at 21 both recieved the same amount. The siblings have a very good relationship.

Another friend had a child who got a large payout due to an accident. While not life threatening it did leave scaring after multiple operations. All money went to that child (rightly?). However, their sibling spent many years of their childhood sitting in doctors offices, hospitals, etc. as naturally, getting the injured child "fixed" dominated. There was so much they could not do because of the injury to their sibling. I always felt that should have been acknowledged with the payout money.

Now one lives a life that is very tight financially while the other is in quite grand circumstances. They don't see each other and in my opinion it related.

Surely there would be tax implications though if you decided to 'gift' half of one's winnings to the other? Under 12k is fine (assuming the DC are not already paying tax)
There are rules that govern how much you can gift to others etc

There are rules that govern how much you can gift to others etc

The only rule is that if you give away more than 350k or whatever it is from your estate within 7 years of your death, the amount over that attracts inheritance tax. I'm pretty sure her children are unlikely to have given away such amounts of assets to anyone. Beyond that rule, you can give money to whoever you like without tax repercussions as long as there is no quid pro quo.