Making financial gifts and saving for grandchildren

Making financial gifts and saving for grandchildren

Published: 17 Aug 2020 Updated: 13 Jun 2022

In these strained financial times, grandparents are increasingly throwing a lifeline to cash-strapped younger generations. The generosity of grandparents across the UK is giving a huge boost to many young people who would otherwise find themselves in dire financial straits. Even before Covid-19, the costs of housing, university and so on were weighing heavy, but now devastation across the job market is piling on the pressure.

At Tilney we have lots of useful information for those wanting to make regular or one-off financial gifts, invest for children, pass on an inheritance early or find out if they can actually afford to give money away without running short themselves. So, to help grandparents (and parents, aunts and uncles, Godparents and generous friends), here is a roundup for you.

Can I afford to pass on money?

It’s a very valid question and one that we get asked all the time at Tilney. People want to pass on money but are afraid of running out themselves. Thankfully, it’s actually a lot easier to answer than you may think. A good financial planner can forecast your future finances using cashflow modelling. To see this in action, have a look at our video, which is part of the Tilney Events on Demand series.

What are the tax rules around making financial gifts?

There are a number of tax rules around giving financial gifts. Our short guide has an excellent roundup and we also have an article, Is now a good time to make a financial gift?, with helpful information.

The Inheritance Tax seven-year rule is a subject we often get asked about and so too are the rules around making regular financial gifts from surplus income. Recently, we also got asked a very specific question about the best way to give money to a furloughed grandson who needed help covering the rent. You can read up on this in our Ask our Experts article and also submit your own question for us to answer if you’d like.

What is the best way to save for children?

There are many different ways to save and invest for children and the answer to this question will depend on a number of factors such as how much you want to save, when you want the child to get their hands on the money and how much control you want. You should also bear in mind that investing carries a degree of risk and you can lose money. We have a guide, Investing for Children, that sets out the options. And here are a few key points:

  • Junior ISAs are a popular choice of account, particularly since the Junior ISA allowance was raised to £9,000 in the Budget in spring 2020. Our sister company Bestinvest has an award-winning Junior ISA that is quick and easy to open (parents and guardians will need to do this but anyone can contribute once it’s open).

  • Many of our clients choose to put money into trusts for younger generations. We have a great video on the pros and cons of using trusts that you may find helpful as well as a comprehensive guide to trusts.

  • If you’re thinking very long term you could always pay into a pension for a child. With such a long time horizon, the investments should benefit from compounding and grow nicely so while the children might not thank you for it now (because they can’t get their hands on the money until they’re in their 50s), they probably will one day! Bestinvest has a SIPP that can be used for children*.

*SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you, then a SIPP might not be right for you.

Have a chat with Tilney – we can help you

We offer free consultations so you can chat to Tilney’s experts about your personal circumstances and goals and find out more about how we can help you. Why not take advantage of one of these to talk about the best ways to help your grandchildren? You can speak to us over the phone or have a virtual meeting. Book online now or give us a call on 020 7189 2400.

Advice in relation to trusts and inheritance tax planning is not regulated by the Financial Conduct Authority, however, the products used in relation to trusts and to mitigate tax may be regulated.


This article was previously published on Tilney prior to the launch of Evelyn Partners.