Are you in a financial position to help your grandchildren, but uncertain about how best to help? Have you got the time and money to make a difference? This blog will help you identify how you can offer the best support.
Sharing wealth and experience between generations is widely viewed as valuable and important. Is there the opportunity for this to happen in your family circle?
This blog outlines a number of ways that grandparents can help their grandchildren. There are many approaches to adopt and, whilst the benefits are substantial, they are not always obvious. There is also the age-old argument that giving with a warm hand is so much better than giving with a cold hand. There is no time like the present. Delaying any help that you could offer may mean it comes too late.
The relationship between grandparents and their grandchildren is very special. Being a grandparent is about spoiling your grandchildren with attention, happy memories, gifts and support. However, some gifts are worth more than a thousand teddy bears, like the gift of helping your grandchild to have a happy and successful life. But how can grandparents give their grandchildren a gift of true value?
Many grandparents have benefited from generous free higher education, rising property values and final salary pensions. For some, this means their retirement years can be spent without financial worries. It also means that they have the financial ability to help their younger family members.
Headline after headline informs us that, in the modern era, your grandchildren are unlikely to have such a positive financial experience. Millennials have been hit by expensive university fees, lower wages, high property prices, and a competitive job market.
According to research, a happy childhood is likely to result in a more successful adult. Turning up to your grandchildren’s school sports days, teaching them good morals, and helping with homework can lay the foundations for them to become happy and successful adults. With the younger generation facing more challenging financial times, a little extra financial support may help them to thrive further.
Education can be a major catalyst for success in adulthood. Some grandparents pay for (or contribute to paying for) their grandchildren’s private school fees.
However, getting a good education doesn’t always mean going to a private school. Only 6.5% of students in the UK attend private school. 85% of all students attend a school that Ofsted has marked as good or outstanding.
St. George’s School in Harpenden is a good example of a high-achieving non-private school. The 2019 Sunday Times Schools Guide awarded St George’s school, a non-selective day and boarding school, the merit of Comprehensive School of the Year. St George’s has consistently placed in the top 5% of schools nationally.
If your grandchildren are in the non-private category, financial support can go towards valuable extra-curricular activities, such as school trips, swimming, music or sports lessons.
Whilst your financial support will undoubtedly be appreciated, always communicate with the family what you are happy to pay for well in advance.
If you think enrolling your grandchild in a chess or recorder club is just a bit of fun, think again.
Children that engage in an extra curricular activity tend to become more well-rounded individuals in adulthood. For instance, having a hobby can greatly increase their ability to cope with stress. Hobbies have other benefits, too, including; time management, relationship building, and even making them a more interesting person.
Funding and/or taking your grandchildren to their hobbies is a way to help them in the long term. Again, it is always good to communicate this in advance to the family so they can plan for it and really benefit from what you have to offer.
3. Helping your grandchildren access the property ladder with a LISA
House prices in the UK have risen over the last 50 years and being accepted for a mortgage is increasingly challenging for first-time buyers. Poor salaries don’t help for twenty-somethings saving for their first home.
The Family Building Society’s survey revealed that around one third of first-time buyers have help from family or friends.
A great way to help your grandchild in the long-term is to give them a head start in saving for their first home.
One efficient way to help them is to contribute to their Lifetime ISA (LISA). They can open a LISA when they are 18 years old and the taxman then adds a 25% bonus on the first £4,000 saved each tax year in the LISA. If you contribute the full £4,000, they will receive an extra £1000 a year free. This means that between the ages 18-26 years they could have £40,000 saved up for their first-time home.
If your grandchild decides that buying a property isn’t for them, then that money can be used for their retirement.
If the money is used for anything other than a first-time home or retirement, there will be a 25% penalty
4. Support them in their careers
Launching a career can be difficult. The competitive job market has resulted in employers’ expectations ever increasing. Many graduates must take a low paid or unpaid internship or graduate programme to gain the experience they need to achieve employment. Trying to pay rent with low salaries is almost impossible in London without living in a shoebox in Zone 6.
This, therefore, is the time when a little extra help from grandparents is truly valuable for their long-term success. Offering to help with rent may mean they can afford to take that exciting but low paid opportunity that will help their career prosper.
Even with a university degree, many careers often require extra training to become chartered or a specialist. The cost of studying and taking ongoing exams is often quite expensive if employers don’t front the cost. This could, therefore, be an area where you can offer your financial support.
Of course, there may be other ways that you can support your grandchildren, such as letting them move in with you to save on living costs, offering valuable advice, encouragement and support throughout their career, helping them prepare for interviews and introducing them to valuable contacts. Your life experience will be invaluable in shaping their future.
Have a conversation with your grandchild about their career and any challenges they face. This can help highlight where your help will add the most value in the long term.
Academia isn’t for everyone. Pressing hard on the formal education route can be counterproductive.
Your grandchild may have a vocational bias. Being in a position to fund an overseas unpaid experience learning about medicine, foreign cultures or biodiversity could be the best thing you can do. They may love to cook, so a chef school in Provence could be their turning point. Similarly, helping a free spirit to fly could be exhilarating for you both.
If you have the means to help your grandchild financially, do it smartly. Make sure any large or regular sums of money are accounted for in your own financial plan. Speak to your financial planner to make sure you are benefiting from tax-efficient planning and compound interest.
If you would like to speak to a Chartered Financial Planner about helping your grandchildren, contact Capital today.