Misc Tristan on 14 Dec 2008 12:09 pm
£30,000 inheritance – how old is old enough?
I read an interesting article in the Guardian money section yesterday, which can be found here. The story is a question to readers of the paper, posed by another reader that had written in, seeking some useful advice.
I’ll briefly explain the situation. A readers’ partner has died, leaving her with some money, which she has decided that she wants to invest for her fourteen year old son, to give him a good start in life, once he’s old (and mature) enough to handle the money. Her question to the readers is “when should she give him the money?”.
Most of the answers seem to focus on the fact that at 18 years of age, the likelihood is that he will be too young to deal with the money, most likely spending it on a fast car and living it up for a while. The perceived wisdom is that at 25 he should be mature enough to handle the money.
There is even one reader that thinks it would be wise to give her son £10,000 a year while at university for three years, so that he would leave without any debt and have the best start in life.
I don’t agree with any of the advice. If I were in her position, I would put the money into trust for him, such that he can spend the income but never the capital, and make the income available to him from the time he starts university, should he go to university or from age 21 if he doesn’t go to university. This way, he’ll be motivated to go to university, which is a good thing, and if he doesn’t, when he gets to 21 he’ll have a helping hand in the form of extra income that he will probably appreciate all the more having worked for a few years already.
What I find most interesting is that the question is not “what should I invest in?” but rather “when should I give him the money?”. In my opinion, it doesn’t matter what age someone is, if they don’t understand money, the process of suddenly coming into a lump sum of £30,000 or more will usually result in the money being spent fairly frivoulously, so it’s in her best interests to educate her son about money so he is able to handle the money when she eventually gives it to him.
