Family solidarity Save the smart way for your grandchildren

Vacations, studies, home ownership: Gran and Grandpa are lending their grandchildren a hand more and more often, and that includes financially. Which measures are worthwhile?

It’s better to give than to receive. Many grandparents in Switzerland are putting this expression into practice. More than half look after their grandchildren for a total of 100 million hours a year. The economic value of this service represents 2,000 million francs, according to the generation report “Generationenbericht Schweiz”. The true value is inestimable. Gran and Grandpa have a lot of love and experience to pass on to their little treasures.

What’s more, an increasing number of grandparents are also helping their children out financially. They realize that the 25-to-50 generation is often on a tight budget. And using their savings to help others makes them feel good. Which measures make sense?

Systematically saving money for your grandchildren

One obvious idea is to open an account for children or a savings account for young people. This is an attractive solution because account maintenance is free of charge at UBS, and children can benefit from a preferential interest rate and receive lots of extras, such as a Topsy advent calendar. The best thing to do is to open an account as soon as a baby is born: newborns even get an initial credit balance of 20 francs.

An investment fund account can also pay off for grandchildren. Since they don't usually need the money right away, they have a long enough investment horizon for it to be worth giving the financial markets a try. An investment fund account is nearly as flexible as a normal account, but invests in selected investment funds which are in turn invested in a broadly diversified range of securities such as shares.

The most convenient option is to pay money in regularly by standing order. This is now possible from just 50 francs a month. If you start paying 50 francs into an investment fund account each month as soon as your grandchild is born, and continue until their 18th birthday, you will accumulate over 14,000 francs with an average annual return of 3 percent. The returns alone amount to just under 3,500 francs!

Advancement on an inheritance – a win-win situation?

If grandparents are particularly well off, it is also worth considering an advancement or a gift. This may allow many young families to afford their own home, for instance. They have no entitlement to claim an advancement, however.

From a legal point of view, almost every gift from parents to their children – with the exception of occasional gifts such as birthday presents – is regarded as an advancement on their inheritance. And an advancement must be deducted from their share of the inheritance on their parents’ death. A proportionate amount must then be paid to their siblings. Grandparents can easily avoid future conflicts by granting all their children equal advancements.

Grandparents can sometimes even benefit from a tax break thanks to an advancement. This is the case if they have a high tax burden – while their children are liable for less tax.

“It’s better to give than to receive” is then also true on a monetary basis.

Generous grandparents

The current circumstances are historically unique: senior citizens between 65 and 74 form Switzerland’s wealthiest age group, followed by those in the 55-to-64 age bracket. In comparison, younger adults under 44 have less money to spare on average. At the same time, the greatest expenses are faced during this stage of life. Seen in this way, it is not surprising that around a quarter of grandparents in most European countries offer their descendants financial support. The amount received directly by grandchildren is not recorded in the statistics.