What to do with DS16's £10K?

[SummerLovingHadMeABlast]

DH and I have been direct debiting £100 a month into an account for the past few years and now my DS has 10K in his account which has a higher rate of interest.

We have received a letter saying once he is 16, which is looming, that it will no longer receive this rate of interest, so there is no point in keeping it there.

The plan is to help fund some of his Uni expenses with this and we want to keep paying into the fund until he is 18/ at Uni.

WWYD with this money?

Premium bonds? No interest but you can withdraw at any time and you may win a bit of money.

We are doing something similar (lower monthly deposits but also some larger 'gifts' from grandparents that they have specifically asked us to save for him). We chose premium bonds - the 'prizes' are paying equivalent to the interest in a standard account and he might get a big prize one day

The problem is, I have had premium bonds for a year and not a sausage off them!

Just bung it in premium bonds
Given interest rates and low amount - there really is very very little you can do
The bonds are crap and used to be so good for this kind of amount

One thought
If you don’t intend to give as a lump sun but rather an allowance throughout uni.

You could throw the lot at your mortgage or pension

And then, if you can afford, just pay him an allowance from your monthly income?

Invest in shares on his behalf?

@SummerLovingHadMeABlast

The problem is, I have had premium bonds for a year and not a sausage off them!

How many do you have? Premium bonds are only worth buying if you've got a lot. I probably average £25 a month (occasional month with nothing balanced by occasional month with £50). DP has the maximum and does a bit better than me.

Stocks & shares IsA

My adults kids have LISAs.
Obviously don't suggest putting all of it in but it could be good investing some of it?

Why is it so hard to just find an account with a lesser rate of interest.
I have similar, and don't want premium bonds, but can't find an account.

@Oblomov21

Why is it so hard to just find an account with a lesser rate of interest. I have similar, and don't want premium bonds, but can't find an account.

What do you mean?

Is the money in his name or yours?

Money in my name.

In that case, I’d explore what someone else suggested and reduce your mortgage, to see if you can reduce your mortgage payments and pay your ds a monthly allowance.
We saved a similar amount for our dd, paid £3K of her accommodation each year and also gave her £200na month allowance. (paying it off our mortgage wouldn’t have reduced the mortgage payments for us)

Already paid off mortgage.

If he was younger stocks and shares isa but given he will need the funds in 2 years premium bonds is probably the best bet.

@SummerLovingHadMeABlast

Already paid off mortgage.

Put in your pension And then just pay him an allowance whilst at into from your income

Pension is by far the most efficient and effective use. If you pay it into a pension you quay for tax relief. You will need to complete a tax self assessment after the tax year has ended and assuming you are a basic rate tax payer the relief is 20% so your 10k becomes 12k automatically. If you are higher rate tax payers it's 40%. This is assuming you havent already not you annual personal pension allowance of £40k contributions. You can give the relief payment as a lump sum and then pay a monthly allowance as others have suggested.

Here a link with some detail

www.which.co.uk/money/pensions-and-retirement/personal-pensions/contributing-to-a-private-pension-explained/tax-relief-on-pension-contributions-explained-a27f53z7qg3f

I've a 16yr old too so can appreciate the dilemma. I just had a look around and found two possibilities. Santander mini 123 account pays 3% on the first £2000, but will be his account. Barclays have a children's saver paying 1.5%, available till 18. Their regular saver with a bonus rate does stop at 16. If that's the account you've got, I would stick with it as 1.5% is a lot better than most cash rates as far as I can tell. Since it drops to a much lower rate above £10000, perhaps go with two accounts and put some into santander.

I haven't looked up cash rates in junior ISAs yet. If you set one up you could pay some of the money in this year and next, and it would revert to an adult ISA when he's 18. Despite others advice, if it is money you want him to use in two years time for uni then share based investments while often more lucrative are much higher risk too. So think carefully before going that route.

Put some into the stock and share isa

I agree, definitely put into the pension of the highest tax payer and pay DS from your income when he's at uni. Or junior s&s ISA.