4 simple ways to have a lasting financial impact on your grandchildren’s lives

You might have read our recent article about gifting, which explored ways to offer money to your adult children over the course of your lifetime, should you choose to do so.

But if you are in retirement and already have grandchildren, you could be focusing on the next generation below your children. We all want to ensure that the little ones in our lives are set up for a successful future, and if you’re searching for simple yet effective ways to start now, you are in the right place.

Continue reading to discover five ways to have a lasting financial impact on your grandchildren’s lives.

1. Teach them about the value of money

One of the greatest gifts you can give to a young person is your wisdom.

Throughout your life, you will have learned valuable lessons where finance is concerned – so take the time to impart these on the younger generation.

The kind of lessons you can teach them depends on the age of your grandchildren. If they are still very young, you could start by giving them pocket money and talking them through what they could buy with that amount. Even this simple lesson helps young children to understand that money isn’t infinite and spending requires thought.

For older children, you could open up more serious conversations about earning money for the first time and establishing disciplined financial habits. The wisdom you bestow in these conversations could last a lifetime.

2. Create a nest egg that can appreciate over time

Now, onto more practical financial tips for those wanting to offer a tangible financial boost to a grandchild’s life.

One way to do this is to create a nest egg that can appreciate over many years. Ideally, you would begin this process when your grandchild is very young, but it is never too late to start.

Of course, there are lots of different ways to put funds away for the future.

• Invest on behalf of your grandchild. Investments could come in the form of shares, property, or valuables like art. The rules around investing on behalf of a child are very complex, so it’s crucial to work with an experienced financial planner if you plan to do this. Remember, the idea is that the asset will appreciate until your grandchild is ready and able to use the wealth, so carefully researching the type of asset you want to invest in is important.
• Put money in a trust. Trusts can be an excellent way to designate cash or assets for a certain person while maintaining some control over how and when your grandchild can access them.
• Pay into a child pension. Although your child won’t be able to access this money until they are in their 50s or 60s (depending on how the minimum pension age changes in the decades to come), starting a pension on their behalf could lead to significant capital appreciation.

Discuss your nest egg plans with a Kellands financial planner for a full illustration of what type of investment may work best for your family.

3. Fund their education

B.B King once said, “The beautiful thing about learning is that nobody can take it away from you.”

If your child wants to send their little ones to a fee-paying school, or your grandchildren plan to go to university soon, you may consider making a lasting impact on their life by funding their education.

You could do so by giving the money to your child, who pays the school fees afterwards, or simply by paying your grandchild’s fees directly. There may be tax advantages and disadvantages to consider here, so it is worth checking in with a financial planner and assessing your options.

4. Make sure your gifting plans are tax-efficient

Along with making lifetime gifts such as the ones described above, it’s likely that you have bestowed an inheritance on your grandchildren in your will.

In order to mitigate the Inheritance Tax (IHT) your family pays, it’s worth making sure that all your gifting plans are as tax-efficient as possible.

Assets and cash in trust

Trusts are usually IHT-efficient because, in many cases, the rate of IHT is usually halved from 40% to 20%.

You will need to appoint a trustee who manages the funds on your grandchild’s behalf until they are ready to gain control of the wealth.

Child pensions

Although as of 2024/25, some pension withdrawals are subject to Income Tax, these are still tax-efficient vehicles for gifting.

Usually, if you pay into your grandchild’s pension, this removes the funds from your estate with immediate effect. This rule may change though, as in April 2027, pensions are set to be included in a person’s estate for IHT purposes.

Education fees

How you pay your grandchild’s education fees will determine the level of IHT, if any, the gift attracts.

If you pay these fees on a rolling basis using surplus income – leftover funds from your pension income or other earnings which fall within HMRC’s specific criteria – there may be no IHT to pay, no matter when you pass away.

If you pay the fees from capital (savings and investments), and you pass away within seven years, there could still remain some IHT to pay on this wealth.

Once again, these rules require a bespoke approach, as each person’s wealth circumstances are unique.

As such, it’s worth speaking to us if you are unsure of your options for making tax-efficient lifetime gifts to improve your grandchild’s life.

Get in touch to discover your gifting options and unlock your money’s potential

If you want to make a tangible difference to your grandchildren’s lives but are not sure where to begin, or whether your plans are tax-efficient, we’re here to guide you.

Email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028).

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, or will writing.

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