How to Set Your Grandkids Up for the Future Without Putting Your Retirement at Risk

In our earlier article, Grandparents, Money and Retirement: How to Help Family Without Losing Your Own Financial Security, we looked at why the "Bank of Nan and Pop" has become such a familiar part of Australian family life, and how to weigh generosity against your own long-term security.

This is a follow-up to that article. If you have decided you would like to help your grandchildren, the next question is simple: What are the smartest, most sustainable ways to actually do it? 

Below are practical options for financial support, ideas for passing on money skills that last a lifetime, and a reminder to keep your own later-life needs in the plan.

Why does "setting up the grandkids" look different today?

Supporting children and grandchildren has always been part of family life. What has changed is the rising cost of living and, therefore, the timing.

These days, rather than waiting to pass on wealth through their estates, many grandparents are helping earlier, in a rising cost of living, when their grandchildren face real uncertainty about whether they can get ahead independently.

Research from the MLC Financial Freedom Report suggests that Australians who received substantial financial support from their grandparents were far more likely to feel satisfied and secure with their finances later in life than those who did not. 

The numbers behind the "bank of nan and pop"

Source: MLC Financial Freedom Report 2024.

Practical ways to financially help your grandchildren

The best option depends on your circumstances, your grandchild's age, and what you want your financial support to achieve for them.

Savings accounts and financial gifts

One of the simplest places to start is a dedicated savings account. Instead of another physical present for a birthday, a regular contribution to a high-interest account set up for your grandchild can grow steadily over time. Even small deposits benefit from compound interest, and watching their savings grow is a valuable lesson in good money habits that will serve them well into the future.

Education funds and bonds

If education is your priority, education bonds (also referred to as Education Savings) are designed to help cover schooling and future university costs, and paying tuition directly can reduce the burden of HECS debt. 

Contributing to their super

If your grandchild is earning an income and has a superannuation account, a concessional contribution can give their retirement savings a powerful head start thanks to decades of compounding returns. There are concessional contribution caps to be aware of, so it's a good idea to understand these limits before offering to contribute.

Help with housing and transport.

Practical help can be just as valuable as a cash gift. Offering accommodation at a reduced rate or rent-free for a period can help a grandchild save faster for their own home or cover the timing gap between rentals. If accommodation is part of the plan, agree on a clear timeframe and shared expectations up front, as we discussed in the original article on grandparents and retirement.

Teaching your grandchildren about managing money

Ask most adults about their grandparents, and the warmest memories are rarely about money! They are about the time spent together and the lessons they learned from the grandparents.

Money skills are one of the most useful life skills you can share, and grandchildren often listen more closely to a grandparent than to anyone else in the family.

• You don't have to spoil them. Constant gifting can set an expectation. Sharing something with sentimental value, or simply your time, often means more in the long run.
  
  
• Help them earn and save towards a goal. With their parents' approval, set up a savings account, encourage them to save for something they want, and celebrate together when they reach their target.
  
  
• Teach by example when it comes to investing. Share what you have learned, the good decisions and the mistakes so that they can avoid the pitfalls. 
  
  
• Get them onto their super early. If they are old enough to have a super account, help them understand how it works, why combining accounts can avoid extra fees, and how compound returns reward starting early.

For more ideas, read the Top 4 money hacks for the grandkids.

Helping without putting your own retirement at risk

Australians are living longer, and retirement now needs to allow for future health costs, changes in living arrangements, transport, home modifications and Support at Home. 

A few sensible guardrails from grandparents to protect their financial security for the future

• Keep an emergency fund so unexpected costs do not force you to draw down savings.
  
  
• Set a clear limit on large gifts so your own future aged care needs can be accounted for.
  
  
• Understand the gifting rules. A pension or other entitlements may be negatively impacted depending on the amount and timing of the gift. The current rules are explained on the Services Australia gifting page.

Plan for your own home care as part of the picture

Most older Australians would prefer to stay in their own home as they age, and planning for that early means your generosity today does not become a strain later.

Thinking ahead about support at home, home modifications, and future aged care needs helps you maintain control over your choices and protects your independence and future financial flexibility.

A living legacy is more than money

Not every grandparent can offer financial support, and that's a reality. Honest conversations about money and the lessons you've learnt can shape how a young person handles their own finances in the future.