/ Money, Parenting

Would you go to the bank of gran and grandpa?

Pound coins in heart shape

Would you turn to grandma or granddad in a cash crisis? You might not be alone – a report from Investec Wealth and Investment reveals one in six grandparents are lending an average £2,496 to their squeezed grandkids.

So why are granny and grandpa helping out their grandkids? According to Investec Wealth and Investment’s research, most (47%) are giving handouts to help pay down debt or just help with day-to-day living costs.

I can relate – the combination of student debt, rent and the rising cost of transport means that a cash handout from a generous grandparent certainly wouldn’t go amiss. And with property prices at sky-high levels, I doubt I’ll be able to buy a house without some help from a family member (or a lottery win!).

Grandparents living in Wales seem to be the most generous, with 21% of them telling Investec that they give their family a helping hand. But you’ll be less fortunate if you live in the East of England – just 10% of grandparents from this part of the country say they help their family members jump financial hurdles.

An older shoulder to lean on

One of the reasons grandparents are gifting money to their younger relatives is that they’ve become more financially savvy – they’re aware of the impact that inheritance tax could have on any assets they pass on.

Grandparents also want to see their grandkids benefit from the help they give them. Thanks to the recession, many younger people have been made redundant or been forced to take lower-paid jobs. Our latest research also shows that irresponsible lenders are pushing Brits into a cycle of debt. So if grandparents want to help ease the burden, why shouldn’t they? That’s if they can afford to…

Would you lend thousands of pounds to a struggling family member? Or would you accept financial help from your older relatives?

Comments
Member

Lending to grandchildren is a good idea. It does good for both parties and is better than leaving cash in a bank. I bet a lot of the loans are never really called in or paid-off, or the “interest” is rolled up idefinitely, so they end up as gifts, which can malso make sense if IHT is an issue. This is the first period in my recollection where grandparents have some capital that they can dispose for a good purpose, and to some extent I feel they ought to extend the hand of fortune to the rising generation.

Member

I’m not sure I’d feel comfortable ‘going to’ the bank of gran and grandpa – I don’t really like asking any family members for money. But I’ve been lucky enough to be offered money by my grandparents before, either to help me when I was a student or when they knew I had something quite expensive to pay for.

I think that as long as people can afford it it makes sense for families to support each other, and a loan from a family member could really help in a situation where someone would otherwise be denied credit or have to pay really high interest. I’d happily lend money to family members if they were in a tight situation like this.

But I think it’s important to distinguish between generous help and expected handouts. It might just be me but I’ve known quite a few people who rely on help from mum, dad, and grandparents and as a consequence they don’t know how to rely on themselves as they always expect a bailout. Help from family members is a lovely safety net to have, as long as it’s not an instant go-to.

Member

Everytime I take my daughter to met her grandparents she always seems to leave with a little envelope. I know she doesn’t ask for it, if she needed money she’d ask her unemployed dad (although he’s usually added funds to her bank account before she asks), rather than her working mum. Oh and money she gets from me she doesn’t have to pay back, but her mum keeps asking for it everytime they meet.

Member

Personally, I try to avoid borrowing money from family or friends whenever I can. But if I’m in a situation where it’s really necessary – I try to deal with it more as a financial transaction than as a ‘favour’. What I’ve done in the past is find out the cheapest rate I could borrow the money I needed from a bank, then find out what my parents were earning on their money in their savings.

I’d then offer them a rate between the two – so I can borrow money for less than the market cost, and my parents would make slightly more than they would if they kept the money in savings. I agreed a repayment scheme (monthly payments) and it seems that everybody wins!

Member
Bob says:
8 March 2013

You might as well lend it to relatives as the interest you get is so low.As they say you can’t take it with you the government makes sure of that.

Member
Joyce says:
11 March 2013

I totally agree with John Ward & Bob, it makes sense, if you have the funds available and can help out your family and save them huge interest rates why not, especially when the interest rates on savings is so low at present, and with a possibility of negative rates on savings being banded about.