How to manage grandchildren’s inheritance for university costs and future house deposit

[Magnificentkitteh]

My DM sadly passed away last year. Her estate is split between her 2 children and 4 grandchildren in various shares. My 2 DC have inherited c£65k each which is intended to help with university costs or setting themselves up with a house deposit. The advice online seems to be to invest in stocks and shares ISAs if you'll be leaving it for more than 5 years, which is the case for the younger grandchildren but my oldest is 15 and planning to go to uni at 18. Is this still the best option for her? Even if it is the tax free allowance is £9k per year so presumably most of it would have to go into a different sort of account.

I'm a bit clueless as to when the bills will fall for uni. Would she be better off investing her money and taking a loan for the fees, or paying the fees upfront?

I think uni costs will use up pretty much all of her money but it would be good to be able to help her with a house deposit as well which I can start to save for if I use my share of the inheritance to pay down our mortgage.

We'd obviously want to do the same for our youngest if but there's 4 years between them so her money will have more chance to grow so will need to work out what's fair. In any case by the time our youngest is ready to leave home we could downsize or relocate to release more funds. I guess there's our own old age to think about but we both have public sector pensions which I'm hoping would be enough to live off once the mortgage is paid off. We are currently 20 yearsish away from retirement.

How about a high interest ISA? Before my Dad died he discussed with my Mum about putting something away for me and my brother each specifically for a house. It wasn't nearly as much as your kids have but it helped, it sat in a ISA til my husband and I decided we were ready. We both opened Help to buy ISAs and i gradually dripped the money from the main ISA into my help to buy. Then when we bought our hour the government gave us some extra money. I don't think Help to Buy ISA exist anymore but regular ISA would still be a good place to put their money.

Will you make your youngest child pay for university costs out of their inheritance, too?

Absolutely crazy not to advise your oldest to use her inheritance for a house deposit. Even a LISA would be a good place to start.

Chat GPT is really good for this, half the money for uni and half for a house deposit (which would have more years to grow) would be my plan.

Is there any reason you're being so arsey to me? You might be loaded but my kids have always expected to fund themselves at least partially through uni, as most people do, along with subsidies from us to the level we can afford. This would logically be via loans. My DM left some of her money to them to help us collectively with this, for which I'm grateful and want to ensure it's not wasted, but we are not loaded and still have ongoing living expenses. And yes of course dd2 would be treated the same, but since she's only 11 the advice to invest her money now is more straightforward.

I have already said that we plan to help them with house deposits as and when we are in a position to do so. That logically comes later. At the moment they are living in the house that would be used to fund them.

But also, at some point I expect my adult DDs to fund themselves, again as most people do, and they expect that of themselves. It's a question of balance.

Thanks yes, there's a lifetime ISA that looks similar to what you describe and would be great, but you have to be 18. One to think about for the future.

It doesn't say much. Just that under the will it's to be held by their parents on trust till they come of age. I think that's standard for minor beneficiaries.

But thanks yes that's what I want to do, but what is the best return possible (with acceptable levels of risk) depends on how long you're investing it for.

Broadly Uni costs are 25k p.a, 10k fees, 10k accommodation and 5k living expenses. So 75k in total X2

My last child has just finished. We didn't pay £10k a year for accommodation, though I appreciate that it's possible. We paid the difference between the max available loan and the loan the child could actually get, plus some help with railfares and course materials.

Unless they're expecting to be very high earners, I'd lock it away for a house deposit and take the student loans. It's quite a gamble using it to pay for something that may not end up getting them an income that would generate back what they pay in. At least with student loans, they'd only be paying back what they can afford.
The highest earner I know doesn't have a degree. Some people I know with degrees are in low paid jobs, some of which don't require a degree. I imagine they'd be seething if they spent 30k upfront on uni fees and then couldn't afford to buy a house.

Thanks. This makes sense. And I think is what I was asking, really. Do people generally take out the loans if they can in theory afford not to? It sounds like they do. Though I do agree with a pp that the loans don't look amazing any more as the interest rate is quite high. But not having to pay more than you can afford from your future income is a big thing I guess?

And only a fool would give an 18 year old free reign with money and not guide them sensibly

Yes we did loans and paid the difference in accommodation costs plus equivalent of £100 per week.

I'd use it for a house deposit. It would take DC ages to save up that amount whilst renting. I would get it in an ISA or help to buy account where the government pay in over the time frame where they are at Uni and then use it to buy a property when they leave. Get through Uni with loans and a part time job. Good luck! 🍀🍀🍀

I have a 16yo and a 15yo who both have about 70k in savings. In our case it's accumulated from gifts from relatives rather than inheritance. It's 100% invested at the moment and we are intending that they will take student loans for Uni and we will top that up from our income as they won't get the full loan. I hope they will use the savings for a house deposit and/or things like travel or buying a car but it will be their choice.

At least three people in my family are likely to never pay their student loans off for reasons including child related income drop, caring responsibilities, low income generally and ill health. So this is why my DC will be taking the loans if they want to go to Uni and keeping the savings.

However with an inheritance the will may stipulate that it should be held in trust in a certain type of account e.g. interest bearing cash savings account. As investments can go down as well as up.

That's what I'm thinking. Surely she gets it at 18 and then she can do what she likes. OP shouldn't be earmarking it for anything specific as she has no control over it presumably once the kid is of age?

Are you looking at the interest rate for plan 5? This should only rise with inflation (RPI), the stories high interest rates that have been in the news are usually about plan 2. Of course who knows what the sitution will be like for your youngest.

A couple of people have suggested just taking out loans for the fees but not living expenses. I've always taken the view that if you are going to take the loan then you might as well take all that you are able to, and then make a decision about whether to overpay once you know your likey career plan. Otherwise you might simply be paying exactly the same amount in loan repayments but just have a lower balance written off at the end.

Yes, true but I have to decide how to invest it based on when she's likely to spend it. I wasn't really asking which she should spend it on, more how to prioritise her spending between the two. She has already called it her college fund. But she would obviously take advice as to what's best (apart from whether to go to uni at all which she's already as firmly decided on as any 15 year old can be decided on anything).

And I have my own decisions to make about our finances based in part on their likely future needs. I had thought the best thing to do would be to pay off our mortgage but keep the same direct debit amount to start building up savings/investments but having looked at other threads on here that might not be the wisest approach either.

Ah right, thank you. This is v helpful. Sounds like loans are the way forwards and I treat her money as a longer term investment same as her sister's and start researching those. Obviously if she decides later to use the money to repay the loan that's up to her.

I'd preserve the capital for a house deposit.

University costs can be met from income (hers and your DCs' via part-time jobs) and loans. You really need to see university costs as an investment in your DCs' future.

Whereas, it's unlikely that they'll have such a wodge of capital - even saving hard it would be difficult to save that much in their 20s.

If you wanted to be a more active investor, once your elder DC is actually going to uniersity, why not buy a house in that town - she can live there & you can rent rooms to other students, so you cover mortgage costs. That's how my father funded my university costs! But he's comfortable with debt and knows about owning, renovating & managing properties.

Sure, but a lot of 18 year olds will be looking for advice from their parents. I'm more use to my daughter having done some research and constructed the spreadsheets than just washing my hands of the whole thing and telling her it's her decision.

I think it would be quite irresponsible actually to leave an 18 year old unsupported with such a big decision.

Apart from anything else, having worked with spreadsheets and used them to compare mortgages etc over 20 years I'm better able to whack together a basic financial spreadsheet than she is.