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Saving for your grandchildren

by Alexandra Middleton | 04 Sep 2013

Often, it’s unconditional love when it comes to the grandchildren. So naturally, you want to make sure they’re financially secure. But what’s the best way to go about that? 

It’s extremely enjoyable to give gifts to the ones we love, especially when these gifts will help them achieve something practical in the future. Depending on your financial circumstances you may be planning on putting aside some money for your grandchildren.

This could be helping out with education, putting a deposit on a home or funding sporting or artistic pursuits.

Where to start

Money can be a sensitive topic, so it may be a good idea to first discuss any financial help with your children and see whether they are happy for you to build a nest egg for their kids.

If you have multiple grandkids, to avoid conflicts within the family, it pays to be fair and put aside equal amounts.

With this in mind, it’s important to be realistic about what you can afford, making sure that you have enough set aside to cover your own needs.

Before committing to any monetary gifts put together a rough plan of your finances, factoring in money that may be needed at short notice for emergencies. If you find that you’re in a comfortable enough position, put together a budget that outlines how much you will need to put aside over time to reach your monetary goal. 

How best to save

Term deposit

A term deposit is a great way to save, as you are guaranteed an interest rate over a fixed period of time.

This means you know exactly how much your money will be worth at the end of the investment period.

Term deposits offer flexibility both in the length of the investment and when interest is paid. By locking in your funds you are rewarded with the highest rate of interest on the market. Compare your options using websites such as Rate City and Info Choice.

The interest earned on these investments or the full amount can then be transferred to an account in your grandchild’s name.

Trust

If you’re planning on leaving your grandchildren a considerable sum, a good way to keep this money safe is to set up a trust.

Money held in a trust is protected regardless of any financial hardship you may find yourself in, such as bankruptcy or litigation.

A key benefit of establishing a trust is that you can decide the age at which your grandchild can access the money, ensuring they are mature enough to make the most of the money and the right decisions when it comes to their newfound financial situation.

Setting up a trust comes with initial start up and ongoing management fees, so it’s best to speak to a financial adviser before committing.

Will

A will can be used to leave your grandchildren a range of assets, including money, property, shares and possessions.

When writing your will it’s important to be specific as to the exact items or amounts you want to leave and to whom. For instance rather than leaving a set amount of money to ‘the grandchildren’ be sure to name each person and amount individually.

A will kit can be purchased from Australia Post, however it’s best to have a solicitor look over it to ensure everything is in order.

If you have a preference as to how you would like the money to be spent, or a parting message for your grandchild, this can also be included in the will.