Grandparents' £1bn 'property ladder' help

One fifth (18%) of British families rely on help from grandparents to provide financial support for grandchildren throughout their childhood, Barclays research reveals.

Across the UK, grandparents are shelling out over £4 billion each year to help families with childhood costs, which equates to an annual average of £2,303 per family.

According to Barclays, almost a quarter (23%) of this cash is used to help children get on to the property ladder, either via house deposits or contributing to mortgage repayments. Additionally, grandparents’ contributions are important early on in life in terms of helping with childcare costs (35%), as well as fees for university education in later years (31%).

However, over a half of grandparents who help their families out do so by giving cash on an ad-hoc basis (58%) and very few take a more structured approach through an annual gift (22%) or planned investment (16%).

Whilst ad hoc gifts can be useful to meet immediate needs such as school fees, Barclays warn that this approach may not be the most cost efficient way of supporting a grandchild’s longer-term needs such as university fees or a deposit on a first home.

Barclays estimates that if you had invested the £2,303 (nearly £200 a month) given by grandparents each year in the stock market over the last 18 years, the investment would now be worth £54,760. By careful planning and regular investment, the contributions provided by grandparents each year might help towards the £40,000 prospective cost of putting a child through university in 18 years time or to provide the estimated deposit on a first home in 30 years time.

Grandparents based in the South West give the most financial support by giving their grandchildren an average of £4,829 a year, whereas grandparents in the North East are most likely to help out financially (22%) than any other region.

However, many grandparents are not making the most of the £3,000 gift they could make each year which is not eligible for inheritance tax, with only 18% saying they would consider it.

Stephen Ingledew, Director of Barclays Financial Planning, said: "Many families are now finding the need to turn to grandparents for financial support as the cost of property and education bites, and indeed many grandparents will want to help wherever they can. However, we’d urge any current or future grandparents to ensure their finances are working as hard as possible for them and by extension for their grandchildren. A little bit of planning early on can reap benefits for the whole family."

"Many grandparents are generous in giving cash gifts on an ad-hoc basis, such as for birthdays or to help cover a mortgage repayment. But, with an average of £2,303 being handed over by grandparents each year, British grandparents should look at other, more financially sensible options. For example, perhaps look at a planned investment or provide an annual gift such as a cash ISA, where grandparents can save or invest for their grandchildren whilst enjoying tax benefits."