Money

‘Am I short-changing my lockdown child?’

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1 day ago

September 19, 2024

‘Am I short-changing my lockdown child?’

Growing any investment will be dependent on the economic backdrop during the term of the investment. It is therefore highly unlikely that exactly the same investment will deliver exactly the same outcome if they start on different dates, even if they run for the same length of time.

I suspect the only way you can ensure absolute parity in the amount each child gets is to keep all the funds you are willing to set aside for your children in one pot.

That way, you can dish it all out equally between them on a nominated future date – whenever the youngest is old enough to take responsibility for owning the asset.

Given we don’t yet know how many children you will have or what the age difference will be, the eldest might end up being a parent themselves by the time they benefit.

Alternatively, you can set up an investment as a parent, in a general investment account, that you ultimately control and nominate for the benefit of your child.

Be scrupulous about making equal contributions for each account. You are proposing £1,000 per year, per child, and maybe you should nominate a particular date to make the deposit – say their birthday – and routinely add the amount and accept that they will have different investment experiences in their individual pots because economics is cyclical.

You, however, will have paid in exactly the same amount to each child’s account.

It is also worth adding that the economic cycle will also deliver different inflation experiences – including different costs, different house purchase opportunities, different mortgage rates and deals depending on when each child reaches the age where they are interacting with these things.

You will be powerless to equalise these experiences for them also.

One thing to consider at outset is that £1,000 paid for child number one today has greater value than £1,000 paid for child number three in six years’ time.

If the average inflation rate was 5pc per year over the next six years you would need to add £1,340 to the 3rd child’s pot if you were to measure equality by the buying power of the money invested, rather than its face value.

Gosh, it is so complicated trying to be fair, isn’t it?

Thank you for pushing through these decisions and getting an early investment set up for your child.

Once you decide what fair looks like to you as a parent, be prepared to explain it to your children as they get older, because they will learn some really valuable lessons about economics, inflation, ownership rights and asset building – but most importantly they will know how important it was for you to find a way to treat them fairly in a lopsided world.

What do you think? Let us know in the comments below and we’ll publish the best responses. Email us – in confidence – with your own Moral Money questions: moralmoney@telegraph.co.uk

Last week’s Moral Money was: ‘How can I decline an expensive overseas wedding invite without burning bridges?’

The best of your comments:

Helen Walshe

It’s easy. Don’t go. It’s not a genuine invitation. You aren’t supposed to go. There have been a few of these in my circle of family and friends, and a little digging reveals that the couples in question don’t want to pay for a big wedding.

They arrange an inconvenient location, and send out a lot of invites to people whom they know won’t come – but many of the “invitees” will send presents anyway – which is the main point of sending the invitations!

The couple would be shocked if they actually attended and they had to be fed and entertained! So relax, Anon. You’re actually off the hook! And unless you would give a present to that relative whether they had a formal wedding or not, you’re not really obligated on the basis of an invite that’s not really meant to be taken up.

Sue Ridley

Just be honest and say you can’t afford it. Perhaps when they return from their nuptials, contact them and take them out for a nice meal.

Also contact the venue/hotel where their wedding will be and organise a bottle of bubbles for their room.

Don’t be embarrassed that you can’t afford it.

Susan Lundie

There is no moral or social requirement to go. Where they get married is their choice.

If we were presented with this situation we would make our apologies giving the real financial reasons for not attending, and in order to discourage family recriminations might well forward a wedding present cheque which the couple will very likely, given the trend noticeable among our nephews and nieces, put towards the cost of the honeymoon the are undoubtedly planning will take place as an immediate follow-on from the exotic wedding venue, or later somewhere else even more exotic.

It appears no young couple these days welcome presents for their new home or funding towards it. Every one of our nephews’ and nieces’ nuptials took place months, if not years, after they had set up a well appointed home.

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