Grandparents stepping in to help grandchildren with the cost of living
Published 3 July 2014
Recent research suggests that nine out of ten grandparents have helped their grandchildren financially over the last two years, so why are our elderly relatives being so generous?
From weekly food shops and new school uniforms to university fees and helping to pay for the deposit on a first home; raising a child can be very expensive. It’s not unheard of for grandparents to help out and treat grandchildren with a cash injection every now and then, but new research from LV= suggests that many are funding much more than that, and over half plan to help their grandchildren out financially over the next five years.
‘The Bank of Gran and Granddad’
Grandmas and grandpas all across the country appear to be stepping up to the plate to cover expenses and help secure their grandchildren’s financial futures, with a hefty nine out of ten admitting they have assisted financially in some way over the last two years.
It seems many are feeling as though they have to help fund their grandkids’ futures, as their parents can’t afford to do so on their own. Rather than relying on mums and dads to help out with important milestones in life, more and more young people are getting financial help from their family’s older generations. According to the research by LV=, one in six grandparents have given their grandchildren money because they felt obliged to step in where parents couldn’t afford to do so.
The average amount reportedly donated to each grandchild per year works out at around £300, but some confess to generously contributing as much as £50,000.
It’s not just gifting cash that grandparents appear to be doing either, as some really take the idea of ‘the Bank of Gran and Granddad’ quite literally, with 7% lending money - at an average of £500 per grandchild - to older grandchildren to help pay for deposits on properties and holidays.
There also seems to be plenty of grandparents splashing the cash on their grandsons and daughters for luxury, less-than essentials – which could show that not all are gifting their relatives because they feel they have to. Included in this are expensive purchases such as cars and holidays, with one in eight respondents admitting to covering these expenses. Yet, only one in 20 contributed towards tuition fees.
The reason for more than a third (37%) of grandparents splashing the cash on their grandkids is, they say, because they simply want to be around to see the cash spent and enjoyed, rather than grandchildren receiving a reduced amount – via Inheritance Tax - after they’re gone.
Nearly three quarters of grandparents state their reasons for helping out so much is due to the rising cost of living – a problem facing many young people across the country. While just under half (47%) say they give their grandchildren pocket money, a further one in eight say they do this regularly.
It seems some grandmas and granddads are also taking note of the increasing rise of living costs by making sure their grandkids are looked after in the future, with one in every six making regular contributions to savings accounts and child trust funds.
New pension laws set to come into play next April will give retirees the power to take all of their pension savings at once. This change could well see an increase in grandparents withdrawing larger bundles of cash to help out their younger relatives, if they can afford to do so.
With just under a year to go before these laws take effect, 6% of grandparents are already considering taking out a big sum from their pension fund to help their children’s kids.
Although it’s great to see such willingness from grandparents to help out their relatives financially, it’s important that retirement plans aren’t put into jeopardy by this generosity. It’s a good idea for anyone approaching retirement age to plan ahead and figure out just where a lot of their pension money will be spent. This will help to ensure our generous grannies and granddads keep their financial futures secure, as well as those of their younger relatives’.