Five thoughtful ways to help your children and grandchildren financially

September has a way of feeling like a fresh start. Schools reopen, routines return, and family life settles back into its rhythm. If you spent time with younger members of your family over the summer, you may also be thinking about the part you play in their future, and how you might help them feel a little more secure.

Younger people face a difficult financial picture. House prices, living costs and the pressure to save for later life all arrive at once. It is natural to want to step in. The question is how to do so in a way that helps them, makes sensible use of the allowances available, and leaves your own plans intact.

This article sets out five options worth understanding. None is right for every family, and most people end up using a combination. Each one sits at a different point on the journey we describe on our life stages pages, from taking first steps to leaving a legacy, and the best choice usually depends on where the person you are helping is on that journey, and where you are on yours.

1. Junior ISAs for younger children

A Junior ISA is a simple, tax-efficient way to save for a child under 18. The account is held in the child’s name, and returns and withdrawals are free of tax. For the 2026/27 tax year, up to £9,000 can be paid in for each child.

There are two types, cash and stocks and shares, and a child can hold both. Cash may suit money that will be needed soon after the child turns 18. Investing may be worth considering where there are many years ahead, accepting that values can fall as well as rise. The allowance can be split between the two in whatever way suits the child’s age and timescale.

A parent or guardian opens and manages the account, but grandparents and other family members can normally contribute, provided the total stays within the annual allowance. The money could go towards university, a first car, the early years of a career or a future deposit.

One point to be clear on: the child can usually take control of the account at 16 and access the money at 18. It becomes theirs to use as they see fit, so it helps to be comfortable with that before you begin.

2. Contributing to their pension

Retirement can feel a long way off to someone in their twenties, and it is rarely top of the list when a first home or everyday bills compete for attention. Yet money paid into a pension early has decades to grow, and even modest contributions can make a meaningful difference later.

Research from the Money and Pensions Service has found that around 29 per cent of working 18 to 25 year olds have never contributed to a workplace or personal pension. If you are in a position to help, you can pay into another adult’s pension, and they should still receive tax relief on the contribution within the usual rules.

For 2026/27 the standard Annual Allowance is £60,000, although an individual’s own relevant UK earnings also limit what can be paid in with tax relief. Some people, including higher earners and those who have already accessed a pension flexibly, have a lower allowance.

You can also contribute to a pension for a child or a non-earning family member. Where they have little or no earnings, up to £2,880 a year can usually be paid in and receive basic-rate tax relief, bringing the total invested to £3,600.

The main limitation is access. Pension money is locked away until later life, so this suits long-term security rather than short-term help. Used alongside other savings, it can give someone a valuable head start on the first steps of their own financial journey.

3. Helping with a first home through a Lifetime ISA

Family support with a deposit has become common, and for many younger buyers it is the only way a first home becomes possible. If you would like to help, a Lifetime ISA is one route to understand.

An adult aged 18 to 39 can open a Lifetime ISA and pay in up to £4,000 a year. The government adds a 25 per cent bonus, worth up to £1,000 a year. You cannot pay directly into someone else’s Lifetime ISA, but you can gift money so that they make the contribution themselves.

The rules matter. A Lifetime ISA is designed either for buying a first home worth up to £450,000 or for later-life savings from age 60. Withdrawals for other purposes usually incur a penalty, so it is not the place for money that might be needed at short notice.

If you are helping with a deposit more directly, agree from the start whether the money is a gift or a loan. Mortgage lenders will often ask for written confirmation, and clear expectations now avoid awkward conversations later. This is one of the areas we discuss most often with families in the 30s and 40s stage, and with parents and grandparents at the other end of the journey who are helping them.

4. Making financial gifts

Giving money during your lifetime is one of the simplest ways to help, and you get to see the difference it makes. Done thoughtfully, it can also reduce the value of your estate for Inheritance Tax.

The wider Inheritance Tax picture is changing. Thresholds have been frozen for many years, asset values have risen, and from April 2027 most unused pension funds will be brought into the estate for the first time. For people who die aged 75 or over, that new charge can sit alongside the existing income tax charge on pension death benefits. We explain how the two interact in our article on the pension and Inheritance Tax double whammy. None of this means gifts need to be rushed, but it does make a regular review worthwhile.

The main exemptions to be aware of are these:

The annual exemption lets you give away up to £3,000 each tax year. If last year’s exemption was unused, it can be carried forward for one year.
Small gifts of up to £250 per person, wedding and civil partnership gifts, and regular gifts made from surplus income may also be exempt in the right circumstances.
Larger gifts can fall outside your estate if you survive for seven years after making them, although the rules are detailed and the position can be complex where several gifts have been made.

Keeping clear records of what was given, to whom and when makes life far easier for your family later, particularly for regular gifts out of income, where evidence of your income and expenditure will be needed.

5. Setting up a trust

A trust is a legal arrangement that allows you to set money or other assets aside for a child or grandchild to use in the future, while keeping a degree of control over how and when it is used.

That control is the main attraction. You decide who the money is for, who looks after it, and at what age or in what circumstances the beneficiary can access it. Many people prefer, for example, that a grandchild receives a meaningful sum at 25 rather than at 18.

Trusts can also play a part in Inheritance Tax planning, but the rules depend on the type of trust, and there can be tax charges on the way in, during the life of the trust and on the way out. They carry ongoing responsibilities and costs. Advice from a financial planner and, where appropriate, a solicitor is important before setting one up. This tends to be a conversation for those at the leaving a legacy stage who want to pass wealth on with structure and intent.

Helping without putting yourself at risk

Wanting to help the people you love is natural. The right approach depends on their age and needs, your own aims, the shape of your family and, above all, what you need for your own future.

That last point deserves emphasis. A gift that leaves you short in later life, or without a reserve for care or an unexpected cost, helps no one. A cash flow plan can show what is comfortably affordable before any decision is made, and how different choices affect both your position and your family’s.

If you are thinking about giving financial support, we can help you look at the options carefully, understand the tax and planning implications, and make sure any help you offer fits comfortably within your own plan.

Questions to discuss with an adviser

What is the best way to save for a child or grandchild?

There is no single best option. A Junior ISA may suit money intended for early adulthood, while a pension is designed for much longer-term retirement savings. The right choice depends on when the money may be needed, how much control you want to keep, and the level of investment risk you are comfortable with.

Can grandparents pay into a Junior ISA?

A parent or guardian usually needs to open and manage the account, but grandparents and other family members can normally contribute, provided the total paid in stays within the annual Junior ISA allowance.

Can I give money to my children without Inheritance Tax?

Several exemptions may apply, including the annual exemption, small gifts, wedding gifts and regular gifts from surplus income. Larger gifts may fall outside your estate if you survive seven years, but the rules are detailed, so take advice and keep good records.

Should I help my family if I am already retired?

You may well be able to, but it is especially important to check that gifts will not affect your own income, lifestyle, care options or emergency reserves. A financial plan can show what is affordable before you commit.

How do the April 2027 pension changes affect gifting?

From April 2027 most unused pension funds will count towards an estate for Inheritance Tax. For some families this changes the balance between drawing on a pension, gifting from other assets, and leaving wealth to pass on death. It is worth reviewing the order in which assets are used as part of any gifting decision.

About the author

Daniel Cottam is a financial planner at Aetas Wealth, working with individuals and families across the UK on savings, retirement and intergenerational planning. His work includes helping parents and grandparents decide how best to support younger family members while protecting their own long-term security.

A conversation with Daniel Cottam or another member of the Aetas Wealth team is a chance to talk through how you might support your family, which allowances apply, and what your own plan can comfortably afford. Arrange a family planning conversation.