A substantial number of us are aware of the need for the Bank of Mum and Dad, often because we play that role. Recently, a new report has revealed that poor old Mum and Dad have run out of funds and the Bank of Gran and Grandad has been forced to step in and take over. It’s not unlike the government saving the customers of Northern Rock!
My granny was a reliable source of a few pennies, and sometimes shillings and half crowns, for treats. She also bought me a Sindy doll when my parents refused. I collected her pension for her and that earned me a few sweets. She taught me how to embroider and crochet, and she told fantastic stories. These are the kind of things that people of the 50+ generations expected from grandparents. Now, it seems, grandparents are the funders of education, fast cars and business start-ups. They’re more “Dragon’s Den” than “Last of the Summer Wine.”
According to the Daily Telegraph, a recent research study shows that between 2012 and 2014, an astonishing five out of six grandparents helped their grandchildren with cash and loans. Even in the first half of this year, 75% of grandparents have dipped into savings to help out and over 50% plan to help grandchildren financially in the next five years.
As a generation we’re better off than we’ve ever been. This puts us in a position to enjoy more holidays and maybe invest in another property, but it also enables us to help out when our own children are not in a financial position to provide support to their offspring. We Baby Boomers have recently been accused of being the selfish generation because we don’t volunteer for charitable work. My response to that is: a lot of us are still working and we need the cash to help our children and grandchildren.
The current economic climate globally has hit the 16 to 25-year-old population particularly hard and even a university education does not always provide the automatic entrance to employment that it once did. In fact, students typically finish university with an average debt of £53,000. It wasn’t like that in the 70s. My friends and I left with an overweening confidence that we’d walk into the job we wanted, and many of us did. But it’s not like that now, except for a privileged few.
How much are grandparents contributing? Somewhere in the region of £647 million a year, according to the International Longevity Centre. With the statistics showing that there are 12.2 million grandparents in the 50+ age groups, that’s a staggering average of £53,000 per grandparent. A little less than 50% of the £647m went into child tax-free trust funds, but the rest was given as cash.
Significantly, gran and grandad are not just putting money away for their grandchildren’s future, they are also paying pocket money to the younger family members. Just fewer than 50% give young grandchildren pocket money and about 15% give pocket money on a regular basis. My gran was the spontaneous giver of pocket money, which still seems to be the case for the majority of grandparents now. It was my parents’ responsibility to give me regular pocket money that I was supposed to learn how to budget with.
One in eight grandparents are also now the source of ‘big ticket’ items for quite a few grandchildren. They provide deposits for first homes, buy the first car and even pay for luxury holidays. They’re also quite likely to be paying an adult grandchild’s rent or supplementing their income in some way. The research shows that 70% of grandparents are happy to do this, while 16% contribute because they know that the parents can’t afford to and the grandchild would struggle without their financial help.
Some grandparents view it as a “living will” and prefer to give their money while they’re alive. It also prevents the money being liable for inheritance tax. In 2015, new pension rules will allow retirees to take out their pension savings as a lump sum. Guess who stands to benefit from this? Well, at least 6% of grandparents have already said they’ll be using this new relaxation of pension laws to help grandchildren.
It seems British grandparents are very loving and giving, in particular the 75 to 84 age group. Guess who is most likely to want to help out? Yes, it’s granny!