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While the bank of Mum and Dad has long been known as the go-to place for first-time buyers, it seems that the bank of Gran and Grandad is becoming increasingly popular, too, with generous grandparents giving thousands of pounds to the younger generation.
Research from Saga shows that the bank of Grand and Grandad has donated over £37bn to their grandchildren, with one in 10 saying that this money was to be spent on a house deposit. This kind of generosity looks set to continue, too, with a third of grandparents still considering or intending to give a financial gift, and one in 10 considering lending money.
Of those who have already given the grandkids a financial boost, they've gifted an average of £9,365 to each child, which could go a long way to helping them get a foot on the property ladder. Some may have even accessed the money through equity release – an increasingly popular way to help first-time buyers – meaning they're helping to pass on property wealth down the generations.
Many view the money they give as an early inheritance, with over half saying they'd prefer to see their grandchildren enjoy it now, which means they don't always specify what the money is to be spent on – four in 10 are happy for it to be spent on whatever the grandchild would like, but given the growing affordability crisis affecting many younger would-be homeowners, it makes a lot of sense for it to be spent on that all-important first home.
"Most of the money grandparents are gifting is coming from their cash savings, so whatever small amount of interest they are missing out on is clearly outweighed by the joy they get by seeing their grandchildren benefitting from the money," said Alex Edmans, head of product at Saga Money.
"However, our customers are increasingly turning to gifting money through equity release in order to help grandchildren onto the property ladder. On average they take £33,000 out of their property in order to give to family."
Thinking of giving your grandchildren a financial boost? Make sure it's the right decision. Saga recommends that you make absolutely certain that you've got enough money set aside to fund your retirement and future care needs, and that you look into any tax issues, as while it could be a tax-efficient means of giving an inheritance, you'll need to look into how much you can give before you (or they) become liable for tax. Speak to a professional financial adviser for complete peace of mind.
If you decide it's the right move, make sure you can truly make the most of your cash, whether you're thinking of giving your grandchild some of your savings or want to release some of the wealth tied up in your home. Find the best savings rates to boost your gift as much as possible, or contact our no obligation equity release service to see if it's worth considering.
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