The ageing population means there are statistically far more grandparents around these days, and a lot of them are providing vital financial support to their children and grandchildren.
In fact, according to research from Standard Life, 45% of grandparents give money to their grandchildren averaging £452 per year. The figures show that they're likely to help with life costs, such as paying off a debt (5%), covering an unexpected bill (15%) or buying a first car (15%), and they'll help fund major life events too.
Many will help with university fees, for example, as well as wedding costs, and a lot will put money into savings accounts for their grandchildren (on average, grandparents put in around £250 per year into such accounts).
There are a whole range of ways grandparents are providing financial support, and the study also highlighted the growing trend of them passing their money onto their children earlier so they can enjoy it together. But, one key thing to remember is that they need to make any financial input as tax-efficient as possible.
Giving away too much can result in inheritance tax kicking in so grandparents will need to bear in mind annual exemption limits – everyone has a gift exemption of £3,000, meaning they can give away up to £3,000 per year without the recipient being subject to tax – or alternatively the grandparent might want to put money into a child trust fund or junior ISA for later use.
A little-known option could also be contributing to a grandchild's pension. It's never too early to start saving, and given that friends and family can pay up to £2,880 per year into an individual's private pension it could add up to a tidy sum in retirement.
With grandparents providing valuable financial support it can be a weight off the mind of parents who could be struggling in tough economic times, and they'll have the peace of mind in knowing they're supporting their grandchildren's financial future.
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