Give your family a helping hand

Rose Mason works three days a week. She starts at six in the morning and works more than a 12-hour shift. She is often called in to work weekends and overnight too, and for this demanding job she is paid absolutely nothing.

Yet Rose says she has the best job in the world: she’s a grandmother. 72-year-old Rose from Surrey says: “The mums work shifts, so they need a lot of childcare. If I didn’t do it, neither of them would be able to work. But I’m not complaining, I love looking after the girls.”

Rose’s children depend on her to make their finances work – and they’re far from alone. Grandparents are increasingly the backbone of the family, looking after the children and offering financial assistance and advice.

Childcare is a major issue for any family, and the role of grandparents here is staggering. A survey for the Joseph Rowntree foundation found that one in five children under 16 years old is looked after in the daytime by a grandparent, and a survey by Age Concern found the number of grandparents involved in childcare has jumped in the last few years from 33% to 82%.

charity estimates the value of childcare by grandparents in the UK stands at £3.9 billion and the Grandparents’ Association says this phenomenon is so common that it runs grandparent-and-toddler groups to help those with caring responsibilities get together.

Carol Watts, a 60-year-old part-time medical secretary from Ashford in Kent, takes her grandchildren to playgroups, and says: “I meet a lot of grandparents there. There are a huge number of us helping out in this way.”

Carol helps her family by looking after one grandchild one day a week, and another grandchild on another day. She then works three days a week. She says: “It’s hard work, but my children came to me and asked for help. It didn’t add up for them to pay for childcare, so this was the only way it could work.”

But stepping in with regular childcare isn’t always possible now that families no longer live round the corner from one another. Because of this, many help out in other ways. A survey by Engage Mutual friendly society found that an astonishing 28% help out with the costs of childcare. Financial help doesn’t stop here.

The Engage survey found that grandparents are helping with day-to-day costs too. Some 33% are helping out with the costs of running the home, and 35% help with debt repayments. A quarter of those who help out have spent an average of £454 in the last six months.

Others assist with the cost of education, from putting aside money for university years to contributing towards private school fees. This is a massive help for parents, but can also be useful for inheritance tax (IHT) reasons – if money is regularly given away from excess income, this means it is out of the estate immediately for IHT purposes.

Others prefer to put money into their grandchildren’s savings pots, often starting when they are born, and then either contributing monthly, or on birthdays and at Christmas. The Children’s Mutual says grandparents give on average £28 a month. Helen Whitworth, a 34-year-old personal assistant from the West Midlands, gets an impressive amount of support from her mum.

She says: “My mum put aside money for the children soon after each was born - I believe it’s a few thousand pounds but haven’t asked. This is in trust for them until they are older and is invested, so it should hopefully go a long way when it matures.”

Grandparents can give away up to £250 every year to each grandchild, which, again, will be out of the estate for IHT purposes immediately. Alternatively, they can use their annual £3,000 gift allowance for this, but this will be instead of the £250 gifts rather than in addition to them.

David White, chief executive of specialist provider The Children’s Mutual, says: “Currently, one in 10 grandparents is supporting their grandchildren financially by saving for their future through a child trust fund (CTF), and it makes a big difference.”

The provider has calculated that if parents and both sets of grandparents are each able to contribute £28 a month into a child’s CTF, with a 7% growth rate, they could create a pot worth nearly £31,400 when the child reaches 18.

A CTF has the advantage of tax-free growth and you have the option of investing your money in either cash or stocks and shares, but there are drawbacks. For example, children have an automatic right to spend the money when they reach 18.

Outside the CTF, however, there are plenty of other options: you can use a traditional savings account, or put money into the stockmarket through a unit trust or investment trust. There are several ways to go about this. You could just give the cash to the parents and leave them to invest as they see fit – this is a useful approach if you’d like the parents to have access when they need the money. The downside is that they’ll pay tax on any gains the money makes, so it’s worth encouraging them to put the money into an individual savings account.

Another route is to use a designated account. Marianne Crawford, a 68-year-old grandmother from North Wales, pays £10 a month into bank accounts designated to each of her grandchildren: “It’s simple for me because I do it by direct debit. Hopefully, when they’re a bit older, it will make a difference for them.”

In this scenario, the money actually belongs to whoever set up the account for the grandchildren, which means it is taxed as theirs and counts as part of their estate for IHT purposes. However, on the upside, it gives them full control over the money as they decide when and how they hand it over.

Alternatively, to avoid being stung by a hefty tax bill you can put the money in a trust, which means it’s counted as outside of your estate and treated as the child’s for tax purposes. However, again they have an automatic right to the money at 18. So for many people, the choice comes down to a decision between control and tax.

Another option is to save for your grandchild’s pension. Grandparents can contribute up to £2,880 a year into the child’s stakeholder pension, and the government will top it up to £3,600.

This may not seem so immediately rewarding, but could make an incredible difference to their income in retirement, as the money has so long to grow. However, you don’t need to put your hand in your pocket to help your grandchildren. In the current downturn, families are trying to make their money go as far as possible, and grandparents are uniquely placed to help out here with tips and advice picked up during the war and post-war rationing years.

Research from Age Concern and Help the Aged found 70% of grandparents are dusting off their making-do-and-mend skills. Some 91% budget carefully and live within their means; 87% cook from scratch rather than buying ready meals; 71% use leftovers; 54% shop for food that has been reduced at the end of the day; 50% sew and mend items; and 29% grow their own vegetables.

This knowledge is incredibly valuable, and over 80% of people aged 18-24 think they could benefit from their grandparents’ experience.

For retired Tina Watkin‚ 65‚ who lives on pension credit‚ money has always gone a long way. She says: “I have started growing my own vegetables‚ using homemade compost from vegetable peelings‚ shredded newspaper and coffee grounds. I usually cook at home but if I buy a take-away as a rare treat‚ I will eat half and freeze the other half.

She adds: “I always mend clothes for my granddaughter‚ with new zips or velcro. It’s a dying art‚ but I have taught my daughter to knit – there’s real pride in wearing something that took three weeks to make. I also cut my own hair instead of going to the hairdressers.”

With families under increasing pressure, anything a grandparent can offer will be welcome. Rose may work incredibly long hours for nothing, but she says: “I know my children appreciate my help, and that even at my age I can be a support for them. I never expected things to work out this way. I expected them to be looking after me as I got older, but I’d much rather things were this way round. It’s much more fun.”