If you’re a parent in your fifties or sixties, you’re well aware of the financial challenges facing young people today; rising living costs, stagnating wages, student debt and prohibitive property prices.
Your children might have found their feet by now (perhaps with a little help), but in just a few years, the next generation will be starting out on their adult lives. Financial security is one of the greatest gifts you could give them.
If your retirement plans are in place and you have savings to spare, consider how you could make the biggest difference.
How much should you save for your grandchildren?
The first step of a good savings plan is to set your financial goal.
One wise investment in your grandchildren is to pay their way through university. Graduates earn, on average, £9,500 a year more than non-graduates (1), so this could benefit them year after year. With fees of up to £9,250 a year(2) plus living costs , the total comes to around £50,000.
Alternatively, you might like to help them to buy their first house, saving them years of rent. In the UK, the average deposit in today’s market is £51,821(3) , but this is likely to rise rapidly over the next decade, with estimates of more than £80,000 by 2027(3).
What’s the most effective way to save for your grandchildren?
Opening a regular savings account is the default option for many savers. But, if the goal you’re saving for is 10 or 20 years away, there’s a risk that the interest rates you earn on your savings don’t reflect relative inflation rates, so your money could be worth less in real terms in the future.
Investing can be a good alternative. It’s considered higher risk than cash savings, as the value of your investments can go down as well as up, but over long periods it’s far more likely that your returns will outperform inflation.
When should you start investing for your grandchildren?
The simple answer is: the sooner the better.
If you invest regularly over several years, starting sooner doesn’t just mean that you’ll contribute more – you’ll also benefit from compounding. This means that any growth on your investments is reinvested in the following year. If you achieve good returns, your investment starts to snowball.
How can you start investing for your grandchildren?
There are a number of ways you can start investing, so you should find the one that suits you.
People with a strong understanding of the financial markets sometimes choose to invest directly, selecting their own investments and creating their own portfolio. People with large sums of money to invest sometimes choose a wealth manager who can make decisions for them.
Click & Invest offers online access to high quality investment management. This means that we’ll recommend an investment strategy for you, based on your answers to a questionnaire about your investing knowledge, financial situation and attitude to risk. We’ll select and manage an investment portfolio for you, according to your agreed strategy.
If you’d like to see how an investment with Click & Invest could perform over time, try our online investment calculator.
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.
3 https://www.dailymail.co.uk/property/article-5152265/First-time-buyer-average-deposit-hit-81K-10-years.html.Research conducted by L&C Mortgages