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Our top tips to start saving for your grandchildren’s future

Posted on 11 January 2019

If you’re looking for an alternative to the piggy bank

When grandchildren come into our worlds, they often become the dearest thing to us.

We love to dote on them, buy them presents we know they’d like, teach them our worldly wisdom.

We want them to be the happiest they can be and ensure they have a bright and stable future.

For some of us, that means looking to give them a bit of financial stability if we can. In fact, one in 10 grandparents have given their grandchildren a lump sum averaging £15,000 according to One Family.

Wanting to help out our grandchildren is often about more than just spoiling them, for many of us it means we’re helping out our own children with any financial difficulty they may be facing.

With childcare, nursery and education costs being as high as they are, many parents struggle financially and it’s understandable that grandparents want to help in any way they can.

extended family sitting on the settee

What are the options?

Of course, cash slipped into a birthday card or pocket as and when is a welcome gift, and our grandkids are usually very appreciative.

But there are some other ways to use any spare cash you have to put towards something that might offer a longer lasting effect.

There are a few things to bear in mind first. While we might want to help as much as we can, many of us also have to consider our own finances first and make sure any aid is within our means. There are ways of doing both.

Don’t wait until the last minute

Just like saving for a car or house renovation, the earlier you start to put money aside, the more financially stable you’ll be. If you think you’ll be saving for a long time, it might be worth looking at the options outlined later.

Consider tax-efficient options

Giving lump sums can incur taxes so make sure you look into the options before gifting money to your grandchildren. Inheritance tax and other taxation issues can take the joy out of monetary gift giving but understanding the rules makes life much easier.

Think about the time of life the money will be needed

The type of help you might want to give to very young grandchildren will undoubtedly be different from the help older grandchildren would appreciate. Costs like school fees or extracurricular activities will be very different from university fees or help buying a first home. And the way you might want to save for these will be different.

Whatever your aim in wanting to help out your grandchildren, here are a few options you could consider that might help you put aside more than just a few pennies for them. And remember, always seek financial advice before you make any decision.

hands of a family holding a wooden house

Setting up a children’s savings account

If you’d like to set up a savings account in your grandchild’s name, you shouldn’t really face any obstacles – though it may take a little longer than putting pennies in a jar.

If you’re setting it up in a grandchild’s name, you’ll need some legal documentation such as a birth certificate.

One of the good things about this option is that any interest should not be subject to tax. A child’s savings account is taxed the same way an adult’s is, but most children don’t earn over the personal allowance threshold.

So, if the child earns less than the personal allowance, which is £11,850 for 2018-19, then ensure any interest is tax free by contacting HMRC for an R85 download – if you’re a tax payer.

Simply fill in the form and give it to the bank or building society you’re opening the account with. This way they can ensure the savings aren’t taxed and you won’t have to go through the process of claiming tax back.

You can normally manage these accounts how you wish, putting in as much or as little as you like, but all banks and accounts will be different and have different terms and conditions, so make sure you do your research and choose the one that works best for you.

A junior ISA

Junior ISAs are a popular way to save for children’s futures. Only a parent can set up a junior ISA for their children, however other members of the family can pay into the account – making them great for grandparents.

Depending on the tax year, there’ll be a limit on how much you can pay into the account, but how you contribute is normally quite flexible. 2018-19 currently allows a maximum of £4,000 – and those with Child Trust Funds are ineligible.

If you’re looking to put in a little each month, you just set up a direct debit to do so and you can work out exactly how much you’ll be contributing for the year.

A junior ISA is a great way to help your grandchildren in the future as the money can’t be accessed until their 18th birthday, and only they can access it.

It’s also a great way of getting children into the habit of saving from a young age as they can see the benefits of ongoing investment.

Once they turn 18, they have total control of the money, so they may need a little advice from their wise grandparent on how to spend or keep saving it!

Setting up a pension for your grandchild

This may seem like a far-off concept, especially if your grandchild is very young. But as we all know, time flies, and before they know it, they’ll be looking to retirement.

You can start a ‘self-invested personal pension’ (Sipp) from the moment a child is born and contribute to it each year. Your grandchild will gain access to it when they turn 55. Over time, a small monthly amount can result in a sizeable sum for them which could really help them out later in life.

Paying a property deposit

If you’re looking to financially help your grandchildren in one fell swoop, then paying a property deposit for a grandchild could be the way to go.

The bigger the deposit paid, the lower the mortgage payment your grandchild will pay, so lending, or gifting, money towards a house deposit should mean lower monthly repayments and help them on a monthly basis. This can be a huge help for grandchildren trying to get on the property ladder.

extended family smiling into the camera

Other gifting

If you simply want to gift your grandchildren some money each year instead for them to spend on what they like, you can give up to £3000 without paying tax. You can also give small tax-free cash gifts of up to £250 to as many people as you like during the tax year.

However you wish to help out your grandchildren financially, they’re sure to be grateful. Before you make any decisions, make sure you seek professional financial advice first.

SunLife offers a range of straightforward and affordable products including over 50s life insurance, funeral plans, equity release, pet insurance, home insurance, car insurance, ISAs and Will writing services.

Here's the information that you need to know about who we are and the other companies that we work with in order to provide our products and services.

Who are SunLife?

Phoenix Life Limited trades as SunLife and is the provider of the Guaranteed Over 50 Plan, SunLife Insurance and the life insurance policy payment option for Funeral Plans. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 1016269). 

SunLife Limited distributes financial products and services and is a company limited by shares, registered office: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 05460862). SunLife Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (registration no. 769427).

You can contact us by post at SunLife, PO Box 1395, Peterborough, PE2 2TR or by phone on 0800 008 6060.

If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan, Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals is not authorised or regulated for this activity by either the Financial Conduct Authority or the Prudential Regulation Authority. Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

The life insurance policy that pays for your funeral will be provided by Phoenix Life Limited, trading as SunLife.

Who provides My Smarter (ISA)?

My Smarter (ISA) is provided by Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority. Details can be found on the Financial Services register, registration No. 188832. Member of The Investment Association. Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.

Who provides the Will writing services?

Hugh James is authorised and regulated by the Solicitors Regulation Authority (SRA Number:303202).

The information contained on this website is based on Hugh James' understanding of the law of intestacy in England and Wales only as at April 2014. The law in Scotland and Northern Ireland is significantly different. This is for information purposes and is not intended to be legal advice.

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SunLife Pet Insurance is arranged and administered by BDML Connect Limited. BDML Connect Limited is authorised and regulated by the Financial Conduct Authority (No. 309140). Registered in England and Wales Number 02785540. Registered Office: 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.

Who provides SunLife Home Insurance

SunLife Home Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.

Who provides SunLife Car Insurance

SunLife Car Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.