I come across a lot of grandparents that want to give their grandchildren a good financial start in life.
I think it is only natural that if you have the money, you want to kick-start a little nest egg for the next generation so that life will be that little bit easier when they are older.
There is a really useful comparsion of the types of investment accounts you could choose from in our free to download guide – Investing for Children.
Naturally there are many different factors you would need to consider like tax implications on you, the child and the child’s parents. You would also need to think about access to the money, that is, who gets access to what and when. Then the type of structure or account you choose is also an important consideration. Once that has been decided you then need to think about how to actually invest the money.
An important alternative consideration might be to invest the money into a Pension. You can invest up to £3,600 in the name of a child or grandchild into a pension. This would not help them start out in life but may certainly help them to retire sooner.
Arguably the next generation will have a tougher start to getting their financial life on track e.g. home ownership, graduating University with large debts, finding jobs etc. However what might actually play out in the future is that it is the end to their working careers, when they reach the point you are at now that they will find the hardest. Will the next generation be able to retire in the relative comforts you find yourself in now? Who knows.
A pension to help them on their way, and perhaps more importantly to encourage them to think about planning for retirement at an early age to promote financial awareness is potentially far more regarding than a few thousand pounds at the age of 18 that could be all too easily spent.