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Your best banking option? The bank of grandma and granddad

grandparents 2433019 640Sadly, my son has no grandparents left. But the memory of his grandmother – the only one of his grandparents he even met – who died two and a half years ago remains fresh. And not just emotionally: the inheritance has come in useful getting us through some financially challenging times as well as providing a nice lump sum which will hopefully help educate junior until he leaves university.

While our financial help has come from inheritance, many others are being assisted by living grandparents every day. Research from Charter Savings Bank says that 5.8 million grandparents give their children and grandchildren financial help worth typically £1,475 a year: a total of £21.4 billion.

And there’s more. Grandparents also provide typically 28 days of free childcare a year which the report says is worth £4.3 billion. Frankly, that sounds like an underestimation: there are an awful lot of grandparents who do the after-school pick-ups at our local primary school. Without them, working parents would have to pay for after school childcare.

The cost to the grandparents is that they have fewer holidays and shell out for fewer home improvements, says the report. What a selfless generation they are.

But there is also quite a bit of financial sense in grandparents giving money to their children and grandchildren. And this canny group are well aware of this: 61% of those who give money to their children and/or grandchildren said they do so because they want to pass their wealth to their family during their lifetime. By doing this, they are reducing their estates and thus, when they die, there could be less (or no) inheritance tax to pay. Inheritance tax is paid on estates worth more than £325,000 (but not if you leave everything to your spouse or partner). There are more details on IHT here.

So their children/grandchildren will benefit yet again because they will get more from the estate. As I said, what a selfless – and canny – generation.

And see our guide to saving tax here.

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Wednesday, 24 April 2019