It used to be the ‘Bank of Mum and Dad’. Yet, today’s youngsters are increasingly reliant on their grandparents for financial assistance.
They face pressures not necessarily encountered by older generations. From rising living costs to wage stagnation, mounting student debt, lower predicted pensions and difficulties getting on to the property ladder, starting out in their adult lives is likely to be considerable harder for the younger generation of your family than they expected.
If you’re a grandparent though, you may be able to help. You may have a retirement plans in place with enough savings to fall back on. Those in their 60s, part of the baby boomer generation, are the wealthiest of any UK demographic cohort. Baby boomers are also likely to end up richer than those coming-of-age today and are twice as likely to offer financial assistance to their grandchildren as the children’s parents, a study by OneFamily has found.
The rising cost of education
It’s hard to ignore the fact that today’s youngsters may miss out on opportunities previous generations, like yours, almost took for granted.
Up until the late 1990s, university education in the UK was effectively free. Since then, fees have gradually ramped up to £9,250 per year with many students taking out loans to supplement their way through university. Today’s students can now expect to leave university saddled with debts of £50,000.
That sad thing is that more of today’s youngsters are turning their backs on higher education, which, let’s face it, could prove a long-term mistake – graduates tend to earn a whopping £9,500 a year more than non-graduates over their lifetimes.
And when it comes to flying the nest and buying their own homes, the future could be problematic for your grandchildren. The average age of a first-time buyer now stands at 30 with a £33,000 deposit typically needed to secure a house. Shelter has warned that by 2020, first-time buyers will need an average deposit of £46,000.
The benefits of investing now
Because of these ever-increasing commitments, there is increasing pressure on parents to pick up the slack, but if you’re in a financially secure position, grandparents may also be keen to contribute. Opening regular savings accounts for your grandchildren may seem the safest option, however, there is a risk that any interest will not keep up with inflation, meaning the money will be worth less in the future.
Instead, setting up an investment pot can provide a much-needed head start for your grandchildren by tapping into the long-term growth potential of investment assets such as stocks, bonds, property or alternatives. It’s also a great way of playing an active role in your grandchildren’s future.
If you’re not used to investing, it can seem a big commitment. It’s important to understand the associated risks – you can lose some or all of your money. So if you want your grandchildren to access the money in the next couple of years, then an investment account, where the value may fall as well as rise, is probably not suitable for your needs.
However, if you would like your grandchildren to have access to the money in three or more years, then an investment account may be the way to go as you are more likely to ride out the fluctuations of the markets over time.
Straightforward investment options
Backed by 180 years of experience Click & Invest make investing easy, providing an online service available to everyone with £10,000 or more to invest. As an example, with Investec £10,000 invested cautiously in 2010 would have delivered a return of 25.2% by the end of 2015.
Most grandchildren tend to outgrow their gifts. But education is one investment that will stay with them over time.
Put your details into our online investment calculator now to take the first step towards a bright future for your family.
All investment carries risk and it is important you fully understand these risks and are willing to accept them. You may get back less than you invested. The information contained in this article does not constitute advice and the information referred to may not be the same for all, therefore we strongly recommend you seek professional guidance from your independent advisor before taking any action.