Welcoming grandchildren into your family is an exciting time. From their first laugh to their first day of school, grandchildren are a source of great happiness. As your family grows, it’s natural that many grandparents want to be involved in setting up the next generation for success, and finances can be a key part of this.
Gifting to grandchildren can be one of the most rewarding aspects of financial planning. Whether your goal is to help with a first home, education, or give them a head start in life, the way you choose to gift can have a lasting impact, both financially and emotionally. The right approach will differ based on your goals and capabilities, and the outcome you are looking for. Your own financial wellbeing should always be considered when gifting, but so should your emotional wellbeing.
Aligning Intentions with Outcomes
The logistics of gifting (how much, when, and through what structure) can be complex. Tax considerations, your own financial needs, and the long-term goals of both you and your grandchild will all play a pivotal role. But just as important is the personal side of gifting.
Your intentions for what you gift may not match how your grandchild intends to use it, and this is something to consider. A family discussion is often helpful to understand everyone’s priorities. Open communication is key and can be invaluable.
Discussing your plans with both your family and your financial planner can help ensure your gift is used in a way that reflects your values. These conversations can also be a great opportunity to gauge your grandchild’s financial literacy and introduce them to key concepts like investing, budgeting, and the power of compounding. Understanding how to best manage your finances is complicated and takes time to learn, but like investing it’s always good to start younger! Having some frank conversations at this stage could make a huge difference to the value of your gift.
Case Study: A Grandparent’s Gift – Two Paths to Financial Growth
To illustrate the impact of financial literacy and planning, consider the story of two grandchildren who each received the same generous gift from their grandparent, who wanted to help them save for a future house deposit:
- £10,000 lump sum at age 18.
- A monthly transfer of £200 for 10 years, totalling an additional £24,000.
- In total, each grandchild was gifted £34,000 over a decade.
However, the two grandchildren’s approaches to this gift were very different and led to very different outcomes.
Approach 1: Limited Engagement
The first grandchild deposited the £10,000 into a basic cash savings account with a 2% interest rate and left it untouched. They chose to use the £200 monthly transfers to cover everyday living expenses, and made no further contributions to the savings account.
- Outcome after 10 years: £12,189 in savings.
- Reflection: While the funds helped with university and living costs, they were not in a position to fund a house deposit at age 28. They later expressed regret about not seeking more financial guidance.
Approach 2: Active Planning and Investment
The second grandchild took a different approach. After discussing options with their grandparents, they invested the £10,000 in a medium-risk portfolio and committed to adding the £200 monthly transfers to the investment account.
- Outcome after 10 years: The account had grown to £47,655 in total, assuming an average annual growth rate of 5%.
- Reflection: The grandchild benefited from compounding returns and was well-positioned to put down a house deposit at age 28.
Key Takeaway
This case study highlights a key point: how a gift is managed can be just as important as the gift itself. While both grandchildren received the same financial support, their outcomes diverged significantly based on their approach and level of financial literacy. By having open conversations and offering guidance, you can help your grandchildren make the most of your generosity.
One strategy that some people find helpful to navigate some of the challenges that come with gifting is to start small and build up. This can help them to develop a relationship with money, afford you the opportunity to see how your grandchildren respond to receiving a gift, and opens the door to deeper conversations if their choices differ from your expectations. For example, if they use it in a way different to your intentions, this could prompt a more in depth conversation about finances. Alternatively, you may wish to explore a different strategy for gifting, such as a trust. Trusts can help ensure that your wishes are followed, or that those you love are protected.
Don’t Forget Your Own Needs
It is important to consider your own financial wellbeing in all of this. Ensuring that you have enough for yourself is critical. Taking your time to come up with a robust plan that allows for adjustments as necessary is a great path to success. With careful planning, the benefits or your generosity can be harnessed by the next generation for their success.
Taking the Next Step: Talk, Plan, and Act
Gifting to your grandchildren is about more than just money, it’s also about connection, legacy, and love. There’s something deeply fulfilling about seeing the next generation thrive and knowing you played a part in that journey. Whether it’s helping them buy their first home, supporting their education, or simply giving them a financial head start, your gift can be a lasting expression of care.
And having some frank conversations along the way can be a critical part of this. These moments can bring families closer together, spark meaningful discussions about values and goals, and help your grandchildren build confidence in managing their finances.
If you are thinking about gifting to your grandchildren, take some time to think through your goals as well as your approach. Speaking to your financial planner is a great idea. They will be able to help you navigate the tax implications of gifting, and ensuring your generosity fits within your broader financial plan. And talking to your grandchildren about your intentions as well as asking them their goals for the future can help to better inform your decisions. Your gift is more than a transfer of wealth: it’s a chance to shape the future, share your wisdom, and strengthen family bonds. Let’s make it count, for you and for them!
This article should not be regarded as financial advice. The value of your investments can go down as well as up and you may get back less than you paid in. Information is based on our understanding in July 2025. Investment growth isn’t guaranteed and it’s possible that you could get back less than you paid in. Tax rules can always change in the future. Your own circumstances and where you live in the UK could have an impact on tax treatment. Aberdeen is not responsible for the information, accuracy and views of external sources.