UK grandparents are Super Generous (‘Super G’) when it comes to giving money to their grandchildren, with £6.4bn gifted in the past year to those under 18 years, according to new research from Orbis Access. On average, grandparents said they gave all their grandchildren a total of £547 in financial gifts over the past year, or £209 per grandchild. Among the gifts given are cash, contributions to hobbies, school fees and savings and investments made on their behalf.
When giving gifts to their young grandchildren, grandparents said they prefer to give money ahead of clothes, toys, technology and entertainment, with 59% saying it is their preferred type of gift.
Although 40% believe financial struggles or debt are the biggest threat to their grandchildren’s future happiness, their financial gifts tend to focus on the immediate gratification of their grandchildren rather than long-term financial planning.
For example, of those who provided financial gifts, cash is king, with the majority (62%) giving their grandchildren cash directly, rather than investing it on their behalf or giving it to their parents. Long term saving and investment products are used by only a few, with just 12% paying into a Junior ISA and 9% paying into other types of investment accounts like a Child Trust Fund.
Yet when asked what they taught their grandchildren when discussing money with them, long term planning was clearly a big factor with the importance of saving coming top (40%) with a further 15% discussing long-term investing.
Dan Brocklebank, Director of Orbis Access says: “We know the UK’s grandparents are incredibly generous and this research shows they worry about the long term financial future of their grandchildren. Yet, their generosity often focuses on the here and now. Part of the joy of being a parent or grandparent is giving a child something that makes their eyes light up so we would never suggest that all gifts should simply be invested. But, there is an opportunity for much of today’s generosity to be channelled in a way that enables longer term benefits too. What’s more, their generosity could help to kick-start the savings habit from an early age, helping parents to save and invest for their children’s future.”
On the whole, UK parents really appreciate the generosity of grandparents. In our survey, close to 77% feel their children’s grandparents are generous with money towards their children, and most (59%) have a preference for grandparents giving money. However, many would rather see financial gifts invested in their children’s future rather than handed over on an ad hoc basis to be spent on trivial purchases.
For instance, one-in-five (20%) parents would prefer it if their children were given money via a Junior ISA which their child can access when they’re 18, one-in-seven (14%) want the money to be given to them so they can save it for their children’s future and over one-in-ten (11%) would like money to be put into another type of investment product.
If invested in a stocks and shares Junior ISA over 18 years and assuming an average growth of 5%, a £209 annual contribution (equivalent to the average financial gift grandparents said they gave per grandchild last year) could grow to £58803. This is not an insignificant sum for an 18 year old and each contribution helps parents save for their children’s future and maximise the benefits of the tax free savings allowance. Grandparents have taken notice: of those who give their grandchildren money, almost half (49%) would consider paying into a Junior ISA.
However, investments in stocks and shares carry risk and values may go down as well as up meaning that investors may get back less than the sum they invested.
