Three quarters of grandparents say that they have dipped into their savings to help their grandchildren this year
Forget the bank of Mum and Dad – today’s young people are now receiving help from the bank of Gran and Grandad, with millions of grandparents offering financial support to their grandchildren.
According to retirement specialist LV=, nine out of ten grandparents (86%) have given cash to their grandchildren since 2012. While most grandparents give on average £30 a month to their loved ones, some have given as much as £50,000. The trend looks sets to continue, as more than half (52%) of grandparents plan to give the next generation handouts within the next five years, with an average amount of £1,000.
Among all grandparents, three quarters say that they have already dipped into their savings to help their grandchildren this year. Over the last five years, one in six (17%) grandparents have made contributions to child trust funds or savings accounts. However, the research shows that grandparents aren’t just putting money aside for their grandchildren’s future. Almost half (47%) of all grandparents give their grandchildren pocket money, with one in eight (15%) giving regular pocket money.
Yet it is not just younger grandchildren who are benefiting from the bank of Gran and Grandad. Grandchildren are now being offered financial support throughout their journey into adulthood and beyond, and they are now receiving help with everything from university fees to deposits for their first home.
One in eight grandparents have helped their grandchildren to buy big-ticket purchases such as cars and luxury holidays, and one in twenty say that they have contributed towards their grandchildren’s school and university fees. It is clear that the generosity of the bank of Gran and Grandad shows no sign of abating, as half (52%) of grandparents say that they plan to help their grandchildren over the next five years.
The research indicates that, due to the impact of rising living costs on families, many grandparents have stepped in financially. Almost three quarters (70%) say that they give their grandchildren money because they want to help out where they can, with one in six (16%) saying that they help out because the children’s parents cannot afford to.
Many grandparents are now contributing regularly towards their adult grandchildren’s day-to-day living costs and are providing money for bills, mortgage and rent. The support being provided is a much needed reprieve for many, with one in ten (11%) grandparents saying that their grandchildren would struggle without the money they give them.
A living inheritance
When it comes to grandparents’ generosity, one in 25 (4%) view the financial gifts they make as ‘a living inheritance’. In fact, the reason that more than a third (37%) of all grandparents are planning to give their grandchildren financial help in the future is because they want to be around to see them enjoy the cash and don’t want their gifts reduced by inheritance tax later on.
What’s more, the new pension rules coming into effect next April could see the bank of Gran and Grandad helping out even more. Under the new rules, retirees will be allowed to take all of their pension savings as a lump sum, and one in 16 (6%) grandparents are already considering taking out a significant amount of cash so that they can help out their grandchildren.
However, the bank of Gran and Grandad isn’t all cash gifts and early inheritance. Amongst all grandparents, one in 14 (7%) have lent money to an older grandchild for deposits for property and holidays, lending on average £500 per grandchild, with one in ten planning to do so in the future.
The generosity of grandparents in Britain is clear to see, and it is great that so many feel comfortable enough to be able to help out their family and plan to continue doing so. However, the average retirement is now much longer than past generations, and people’s lifestyle and associated costs are likely to change over this period. It is important that those approaching retirement choose to structure their income in a way that offers them enough financial flexibility to enable them to remain generous, but also adapt to their changing needs.
According to Opinium, 82% of grandparents give on average £30 a month. So far in 2014, grandparents have given an average of £184. Divided by the number of months passed so far (six) gives a figure of £30 a month.
52% of grandparents are planning to give an average of £1,000 (when asked to estimate how much they will give) to all their grandchildren over the next five years.
According to Opinium, 17% of grandparents put money towards a trust fund or savings account for their grandchild during the last five years.
According to Opinium, 7% of grandparents have lent money to a grandchild which they expect to be repaid. When asked how much these grandparents lent their grandchildren, the average (mean) figure was £500.