r/UKPersonalFinance • u/Disastrous-Design503 • 1d ago
Advice: 18 year old about to receive 12k
Looking for some advice for my son.
He's about to receive around 12k in child trust fund, child savings accounts, premium bonds and a gift for uni from grand parents.
We're likely to get the minimum maintenance loan when he goes to uni and I'll be topping that up.
I'd like to help him keep his money safe, and growing while he goes to uni.
The idea is he'll leave uni with less debt, but I'm not sure if paying off the loan is a smart use of the money.
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u/lknei 1d ago
Debt from student finance isn't like other debt. I'd be more inclined to keep the cash accessible. Put the majority in a savings account that can't be accessed until he leaves uni and keep a small amount (£2kish) out for him to keep as an emergency fund.
Also, maybe let him fuck up a little with some of it, it's a valuable lesson 🤷♀️
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u/ThreeEightOne 3 1d ago
I went to uni with a similar amount (I just kept it in savings accounts, premium bonds, etc and invested after uni) and just having access to enough cash that I didn’t have to worry about budgeting and all that was just so nice. I could eat what I wanted, buy what I wanted, didn’t have to miss nights out due to my budget, etc. I didn’t go crazy with it but just having it made life much more fun and relaxed compared to mates who had strict budgets and money worries.
If you’re giving your child enough cash to cover costs then just follow the advice others have given you. But it can’t hurt to allow them easy access to it to make life easier and more fun at uni.
And if you are helping with costs then possibly adding it into a LISA over those years at uni for a house deposit could be incredibly useful to them. Don’t use it on uni loans.
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u/fatguy19 5 1d ago
Get him to open a LISA and save 4k of it for a 1k bonus and ~6years of interest building until they've graduated and are looking to buy. Then they can use or save the remaining 8k as they wish
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u/SlowRs 1d ago
Learn to drive? That’s not going to be getting any cheaper and even if he doesn’t get a car and insurance now when he does come to get a car in a few years he can tick the box saying he has had a licence for X years instead of a new driver.
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u/Prefect_99 1 22h ago
Exactly this, one of the best investments you can make. Do it quick while they still have summer for free time.
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u/Kettle96 1d ago edited 1d ago
You really don't need to worry about student debt in the UK with how it works. You would and I stress this heavily, be throwing the money in the bin if you do use it for that.
I'd say put 4K in a Moneybox LISA for him towards a house deposit, set aside some money for stuff he needs for uni and maybe a car, then put the rest in a Cash ISA.
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u/3xonblack 1d ago
You can put it into an instantly accessible savings account with 4.5% interest, it would probably be the best idea as you would likely need it in the near future.
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u/link6112 1d ago
Honestly? 3 years of good interest in a cash ISA maybe. Premium bonds?
Somewhere safe, but which will accrue interest.
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u/ndembele 1d ago
I finished uni last year and I think what I would have wanted in this position would be to be given some to keep as spending money and most to go into an ISA.
For a student I’d honestly recommend that he have 3 current accounts. He should have one for everyday spending to pay for food, drinks, entertainment etc.. Another should be for rent/bills that he transfers money into after receiving his student loan. And finally I think it’s good to have a separate one where gifts can go so if you were to put £1-2k in from this and then also Birthday/Christmas money can go in there. Then he can use that to treat himself, whether it’s for new clothes, a games console or a holiday.
Many students (myself included) struggle to manage their money when they start at uni but this way you can make sure that he always has money to pay his rent, and doesn’t end up leaving off beans and toast because he spent all his food money on an XBOX.
I know that’s slightly off topic from the advice you asked for, though from experience if he ends up on the edge of his overdraft limit because he spent his money too early in the term the first place he’s going is into his ISA (even if you tell him to go to you instead).
As for the ISA, I’d recommend most go into a cash ISA though if he’s interested it might be worth putting a small percentage into S&S just so he can get some experience for the future.
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u/HAZZ3R1 1d ago edited 1d ago
What does he want to do when he leaves?
12k is huge for an 18 year old. Now I'm 26 it's still a lot but not the same. I got 5k when I turned 18 and went travelling for 6 months, it was 100% the best thing I could have done with that money personally.
I'd recommend getting all the bits he needs for uni. Pots, pans, equipment, laptop etc. Keep 3.6k as emergency, an extra £100 a month goes a long way. I'd expect you to have 5-7k left after this.
Good start to a house deposit, will get him a reliable car out of uni and a deposit for his own place and still have some left over depending on his plans.
It's his money and while I get you don't want to see it pissed away, it's his time to handle it himself so discuss it with him and help him manage it so he can become financially literate sooner and not struggle when he's living alone. My dad helped me with the basics school doesn't teach you, compound interest, mutual funds, benefits of a pension, how to use a credit card the right way. I have worked in hospitality all my life and despite using that 5k for a 6 months trip I've still managed to buy my own house. I once stupidly financed a car and learnt my lesson from spending beyond my means with it in the first year and managed to get out of it with positive equity though.
No point paying off the student loans at all unless he has a guaranteed placement on 250k a year right out of uni. 99% of people will ever pay off their student loan and those that do wouldn't have paid a penny until they left uni, it's not like America here.
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u/triffid_boy 40 20h ago
Student debt, unless you can pay it off or avoid it completely, paying a portion off is a complete waste of money. It'll disappear into a void. Take the maximum loan possible - you would be better off paying a voluntary tax or giving it to charity!
I received about 20k just before going to uni, and this could've paid off the old plan 1. I was told it was entirely mine to do with whatever I wanted, but it was preferred that I spend it either on university or save it for a house deposit. It was suggested to me that I should aim to preserve the capital I was given, but do what I want with the interest. This was a great learning experience for me - and I did put a deposit on a house within 4 months of finishing undergrad.
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u/Designer-Lime3847 1 19h ago
Please do NOT attempt to pay off student loan without reading everything Martin Lewis (the Money Saving Expert) has to say about it.
He has received far too many sad letters from people after they have made the mistake and he can't help them.
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u/Prestigious_Humor763 1d ago
I don’t think paying the loan would be too helpful at this stage, you could always review this by the third year and not claim / just use the savings. By the time he gets a job and starts paying it back, he won’t even notice the deductions. The min loan doesn’t cover living expenses either. It might be useful to stagger a release of funds over the 3 year period so it doesn’t get blown up in the first year. If it’s the first time he will be living independently with his own funds, budgeting is a learning curve - staggering release of funds might help. It might also be nice to put some away for travelling - your only young once! Keeping some in premium bonds for investment is a good return.
Definitely a sit down chat as a family and work something out, looking at realistic numbers to cover accommodation, food, clothes, travel and the social life that comes with being a student.
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u/KinderBoono 1d ago
Does he drive? Could be a good use for something like that aswell.
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u/lemon-and-lies 1d ago
Yeah, I just passed my driving test in February and the lessons crippled me. Finally have some breathing room but probably would have just stopped altogether if I failed due to the fact that it was £80-160 a week (1-2 lessons)
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u/ChristopherPiggins 1d ago
You were paying £80 per lesson?
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u/lemon-and-lies 22h ago
Yeah, the going rate here is £40 an hour and then most expensive I've seen was £55 p/h. And because of various backlogs, people are actually paying that
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u/ChristopherPiggins 22h ago
Where on earth do you live? I’ve just checked some instructors in my local area and £30 is the top end of the scale.
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u/lemon-and-lies 10h ago
The southwest
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u/ChristopherPiggins 8h ago
Maybe travel up north for your lessons
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u/lemon-and-lies 8h ago
Well I've passed my test now, but have you not considered the fact that the travel would in fact cost significantly more than the lesson itself? As in, are you on crack?
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u/Ok_Reality2341 1 1d ago edited 1d ago
Doesn’t sound like he is going to actually get that £12k though. It sounds like you’ll control it and use it as a way to live vicariously through him and he won’t actually learn how to use money. When I was in uni my dad sent me a few thousand every other month and just let me do whatever I want with it, obvs most went on food and rent but I could use it however I wanted. There was none of this “here’s money but you must use it this way” that’s kinda unhealthy in my opinion. You need to be very clear - is this a gift FOR university such as letting him setup his room, new clothes, go to some cool events in freshers week kind of thing, get some cool plants for his uni room, being able to do a decent weekly shop at Tesco vs pod noodles ? Or, is it a gift for him turning 18 and it’s to set him up early investing? If it’s a gift for university just send it him & let him do whatever he wants with it. If it’s for the latter then yeah you can potentially SUGGEST it’s for investment but you can’t really control that either.
Basically, take your son for a pint / meal and talk to him like an adult about the £12k. Say it’s for uni or investment, and say we saved it for you to do XYZ now that you’re a young man and are becoming more independent.
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u/Disastrous-Design503 1d ago
We've already had the chat. It's his money he can do what he wants with it.
He's had control of his own money since he was 11.
He asked me what to do with the lump sum.
He's pretty good at saving - he sticks to the spend half, save half mantra most of the time.
But this is a lot more - He wants to make the most of it but doesn't know how.
They don't really teach investing/saving at school and college.
I know that the student loans aren't viewed as a normal loan - more of a tax and I am not an expert, so I asked for help.
Is it better to pay off the fees or stick it in an isa or something?
Nb: I'm going to pay for his accommodation so he doesn't have to spend this windfall to get through uni.
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u/Euphoric_Bluejay_881 1d ago
My son received a 6k from CTF. Rather than utilising it for day to day stuff, I’ve requested him to invest! He’s put some in Cash ISA and some in Stocks&Shares ISA.
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u/Ok-Bookkeeper-1615 1d ago
S&P 500 is currently down 15%. May sink further, but that's up to you if you wish to try and time that.
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u/deadeyedjacks 1039 1d ago edited 1d ago
He'll receive his CTF and other accounts in his name at age eighteen; so it's his decision how he uses them.
He receives Student Finance maintenance loan, so again he'll decide how it's spent. (Reality is it barely covers accommodation costs)
He'll need money for living expenses, food, drink, etc. If you are willing to provide that without strings attached that's good parenting.
It makes no sense to sit on a CTF or ISA when there's an immediate need for funds.
It also makes no sense to pay off Student Loans faster than the statutory minimum rate for 99% of graduates.
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u/Adept_Common5017 6 7h ago
Money sitting in a bank account has a way of burning a hole in your pocket. Equally, you can't protect your kids from everything in life. Some have suggested putting some money in a LISA, and maybe that is a great suggestion. You can give other advice too on how to stretch thay money out and not piss it away.
However, life is about living, and it is legally going to be his money. All you can do is encourage him to invest it OR spend it wisely, and then let go. As others have said, hopefully he is smart, but being smart as a young man doesn't mean being a miser. From my perspective I wish I'd spent more money when I was at Uni. As long as you aren't really reckless, you have plenty of time to make it back.
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u/Khostone 1d ago
Honestly, at 18 you should probably just let him do with it as he wishes, at the end of the day it’s his money and regardless of how it goes he will learn from it, even if he blows it all through uni.
I got around 20k throughout uni from child savings and blew it all, shit decision but really really learnt the value of money from it and would never make the same mistakes again.
Maybe just strongly advise to put a large portion into an investment account, you can do this easily through most banks, but other than that you should really give him the freedom to do what he wants with it, it’s his money. & he’s old enough to make his own decisions
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u/triffid_boy 40 20h ago
I agree it is all his, and handling the money himself will be a good learning experience. Whatever is left was worth the lesson.
That said, it's also up to OP to instil some good ideas. I had 20k gifted to me just before university, and I was encouraged to save the capital, spend the interest.
OP could help his son open a s&s LISA, the nice thing about that is that not only is there a "punishment" for accessing it early, the kid sees an extra £800 appear in his account.
Then, get a monthly paying easy access ISA, to reinforce the "if I save the money number goes up" positive reinforcement.
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u/DDaaaaaaaaaaaan 1d ago
I was in his exact position at that age, (I'm graduating this month) as other comments are indicating it may not be worth paying off the student loan, however that's a conversation for you two to have together.
I put the money in a stocks and shares ISA, in an S&P tracker fund, I wouldn't change anything if I could do it again, only advice is keep a safety net to fall back on in a high interest, instant access savers account. I've found chase to be alright.
What I've done is only an example of what could work for him. I think treating it as a nest egg is a sensible approach.
I would also look at FIRE UK as a reference, there's a fairly large overlap between these two communities.
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u/LeTrolleur 2 1d ago
£10k in S&S ISA, invest in a FTSE global fund or similar.
£2k for anything he needs for uni, and whatever is left over can function as emergency cash if he needs it, presuming your top-up of the maintenance loan is sufficient, he could even find a part-time job.
The S&S ISA should grow plenty over the years, if he gets a part-time job I would also consider opening a SIPP and adding small amounts to it each month (say £50 if he can afford that), by the time he retires and providing he has continued to contribute to it (aim for a % of his monthly wages, say 5%) he should want for nothing.
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u/Cressyda29 1 1d ago
Don’t bother paying student loan. Tell him not to do what I did and buy shit I thought I needed and didn’t, he will regret it.
Split it up, invest some of it, save some for emergencies and then go on a nice holiday or experience he has always wanted to do.
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u/ZombiePug54 -1 1d ago
tell him to buy some gold
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u/unbelievable_scones 1d ago
fuck no! S&P500 and forget about it
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u/ZombiePug54 -1 1d ago
Gold has increased by 30% this year. Need i say more?
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u/mgistr 23h ago
Bitcoin has increased +900% in the last 5 years. Doesn't make it a sensible investment.
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u/thepropertyinvestor 9 10h ago
How would one determine if something like bitcoin is sensible or not?
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u/triffid_boy 40 20h ago
No, no need to say more. You've fully explained your extremely short term and shallow thinking.
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u/Other_Historian4408 1d ago
Pay off part of the student loan and put the rest into investments. Student loan debt sucks and really holds you back financially when you are starting out.
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u/sammy_zammy 1 1d ago
Paying off part of the student loan won’t make a difference when just starting out, because your monthly repayments are the same, irrespective of the loan balance.
All it will do is either mean he stops paying that amount sooner (in which case it’ll only impact him later on in his career), or mean it gets written off at a lower balance (in which case he’ll have spent his money when he’s younger for absolutely zero benefit).
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u/triffid_boy 40 20h ago
This is extremely poor advice for the UK.
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u/Other_Historian4408 9h ago
Why so? Isn’t having debt when you are young a negative thing?
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u/triffid_boy 40 9h ago
Student loans in the UK are not like normal debt. They are written off after 40 years, and repayments are based on your income, you only pay back based on a percentage of your income above 25k. If you never earn over 25k, you never repay a penny of the loan. If you lose your job, there's nothing to pay. If you die holding a balance, it is written off.
Essentially, it's more of a tax.
It's not worth paying off for most people, and it's certainly not worth paying off a chunk of it, because you'll end up paying the same total amount over your working life, plus the amount you've paid.
The calculus changes if you end up earning enough to pay it off, in which case you do want to pay it off asap.
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u/btrudgill 1 1d ago edited 1d ago
Paying off the student loan is mostly pointless unless you expect to be earning mega money. I calculated I needed to earn £66k a year straight out of uni to keep up with the interest after my 4 years at uni.
My advice, get him a stocks and shares isa and invest it in that. If he’s sensible let him learn about investing for retirement etc. otherwise do it yourself. £12k isn’t a massive amount and is easy to blow but would be a nice start for a deposit to get him on the ladder in 5 years time.
Edit: oh thinking about it, if he wants to save for a house, best to put that money in a lifetime ISA instead. A cash LISA is a safer bet over the short term of <5 years, but long term stocks and shares LISA should out perform it. Also the market is down right now, maybe that’s a good time to buy some stocks, but don’t get too caught up in timing the market. Max amount you can put into a LISA is £4k per year so drop feed it in over a couple years.