You could be a grandparent in a million!

FOR generous parents and grandparents who want to lend a helping hand, there are many ways to boost youngsters’ finances.

The earlier you start, the longer you have to build up a nest egg to pass on, but there is still plenty you can do for teenagers.

So whether it’s helping with a deposit for their first home or investing in a pension for them, here we explain how to help secure your loved ones’ financial future...

PENSIONS IT MIGHT seem bizarre to think of your little ones drawing a pension when they are only just out of nappies, but with a relatively small investment now you could provide an enormous gift for their future.

Thanks to generous tax relief on pension contributions, you can pay £3,600 a year into a plan for your child or grandchild and it will cost you just £2,880.

If you do this every year until they turn 18 — and it was then left untouched until age 64 — they would have a pension pot of £1million on retirement. This assumes annual growth of 5 pc a year.

Derek hill, 73, a retired finance director from Cheshire, who lives with his wife Sue, set up pensions at birth for his grandchildren Jane, now 16, and Jacob, nine.

he opened Junior Selfinvested Personal Pensions (Sipps) with A J Bell. After years of investment, Jane’s pension is now worth £46,000, Jacob’s £41,000.

he says: ‘Saving into a pension offers unbeatable tax breaks which immediately boost your pot.’

JUNIOR ISAS

ONLY parents and legal guardians can open these taxfree accounts for the under18s, although grandparents can still pay in. You can put away up to £4,368 this tax year and children cannot withdraw the money until they are 18, though they can run the account from age 16. The money can be kept in cash or split between cash and shares.

Coventry Building Society currently offers the top Junior cash Isa with a variable rate of 3.6 pc.

For those willing to take more risk, Fidelity and hargreaves Lansdown offer Junior Investment ISAs with a wide range of funds to choose from. Remember to factor in fees and charges.

Fidelity’s Tom Stevenson likes Rathbones global opportunities fund for longterm growth. hargreaves’ Laith Khalaf suggests the First State Asia Focus fund.

SAVINGS ACCOUNTS

YOU may prefer to opt for an ordinary savings account. Just like adults, children have a taxfree personal allowance on income of £12,500 for this year.

A combination of different taxbreaks on savings income for lowearners mean they could actually make up to £18,500 a year taxfree. HSBC’S mySaver is currently a toppayer at 3 pc interest.

But beware if you are giving money to your own children. For if the interest on what they earn exceeds £100 a year, you will be charged tax at your normal income tax rate if it’s not in a Junior Isa. grandparents and other relatives are not affected by this rule.

Children usually get control of the account from the age of 16 — even if you are also named on the account.

If you’d rather they get access to their money when they turn 18, you need to set up the account as a ‘bare trust’ — which can be done with most children’s accounts by requesting and completing extra paperwork at the bank. In Scotland, they will still gain access at 16.

PREMIUM BONDS

GRANDPARENTS and parents can also buy Premium Bonds for children, which give them the chance to win taxfree prizes each month, ranging from £25 to £1million.

The smallest holding you can buy is worth £25. Every £1 bond number has a 24,500to1 chance of winning.

LIFETIME ISA

FINALLY, consider encouraging your children or grandchildren to open a Lifetime Isa when they turn 18. For every £4,000 they pay in each year they will get a £1,000 bonus from the government.

If you can help them reach the full annual contribution every year, by the time they are 28 they will have £50,000 — even before interest or investment returns.

The catch is that if they need to take the money out for any reason other than buying their first home or after they turn 60, they’ll have to pay a 25 pc penalty on any withdrawals.

You can open a Lifetime Isa up until the age of 40 and carry on making contributions until you turn 50, which means it is possible to earn a maximum government bonus of £33,000 as long as the rules do not change in the meantime.

In common with other types of Isa, you can choose whether to keep the money in cash or stocks and shares.

Newcastle Building Society offers the toppaying cash Lifetime Isa with an interest rate of 1.1 pc which you’ll get as well as the government bonuses. Skipton and Nottingham building societies offer alternatives paying 1 pc. For investments, A J Bell and hargreaves Lansdown are two of many providers.