Financial News

Generous Grandparents Splash The Cash For Grandchildren

Grandparents like to spoil their grandchildren rotten by forking out cash from their retirement savings in generous financial gestures.

The grandest of all is a willingness for nearly half (44%) to contribute to the deposit for buying their grandchild’s first home.

A year ago, the deposit averaged £32,841, representing a significant amount for grandparents to dole out.

Help with buying a home is not the only major life event grandparents will pay for, says research by later life financial firm Hodge.

The bank asked more than 2,000 people aged between 60 and 80 years old how much time and money they are prepared to spend on their grandchildren.

Generous generation

One in four expect to help their grandchildren with large expenses, ranging from buying a car to university fees and the cost of a wedding.

In fact, 38% confirmed a willingness to help with the cost of education, while 35% would be pleased to fund a gap year.

Elsewhere, 15% would contribute to a grandchild’s wedding or civil partnership ceremony, while 6% would help pay for a first car.

The same survey also found 70% would expect to contribute between £2,500 and £5,000 for each life event.

Matt Burton, managing director of mortgages at Hodge, said: “These findings come as no great surprise to us, we see many of our customers taking out later life mortgage products to help family members, as well as themselves, live better lives.  For example, our own customer data shows that when people take out a retirement interest only (RIO) mortgage, 16% are doing so to give their family a gift.

Tax-effective saving for grandchildren

“Generous, and willing to share time and money, this all goes to show they really are the generous generation.”

Many grandparents set aside cash each month for grandchildren in a junior ISA, junior SIPP or investment account.

The money is invested in stocks and shares with the aim of outpacing inflation.

“Cash may seem like the safest option with guaranteed returns but there is a risk that interest will not keep up with inflation. A child will not lose money, but they may be able to buy less with the fund in future than they could today,” said a spokesman for financial platform Hargreaves Lansdown.

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