Private schools are being bankrolled by grandparents as a record generational wealth transfer hits its stride and younger generations grapple with rising costs.
The Bank of Grandma and Grandad is joining the ranks of parents helping Generations Z and Alpha get ahead through early inheritances, with cash to fund housing costs, education and even daycare.
Craigs Investment Partners adviser Gretchen Williamson says “living giving” is something she frequently discusses with clients.
“I think it’s more rewarding, and you get to see what they do. People don’t always do what you hope they’re going to do, and you can’t control that, but you want to understand what things will look like for them and how they’ll use that money.”
She adds: “The one thing that they do really like to invest in is education because they think that will be what will give their grandchildren an advantage in the new world.”
Williamson has been an adviser at Craigs for 21 years and deals with a “broad spectrum” of clients. Grandparents funding their grandchildren’s education is not a new trend, but it is happening more frequently now than earlier in her career, she says.
“There is probably more going through to the grandchildren than there would have been 20 years ago. But for some families who have always had children in private education, this is not new.”
Private tuition fees continue to hit new highs, with 10 colleges now charging upwards of $30,000 per year. This pushes fees over the full five years of high school to around $150,000.
Many will baulk at the number of zeros in that figure: less so those with a seven-figure portfolio.
Williamson says the average portfolio held by her clients sits north of $2 million and the majority of clients are over the age of 60. That combination forces more explicit discussions about legacy, fairness between children and how much to give away during their lifetimes.
During the peak of the property boom in 2021 and 2022, she witnessed “the bank of mum and dad” helping their children into homes, often in neighbourhoods close to the wider family.
“Now four or five years later, we’re seeing more of the grandparents trying to help the grandchildren,” Williamson says.
“Part of that is private school fees, or it could even be daycare and other costs, because people are finding it hard to make ends meet.”
Data illustrating the shift isn’t readily available; Tom Curtis, St Cuthbert’s College head of senior school, says that while he is aware anecdotally of some grandparents stumping up the funds for tuition fees, the vast majority of invoices are issued to parents, or trusts.
“As such, we do not have a record of any financial support parents might receive from extended family for fees.”
This year the Auckland school is charging families $27,500 for junior school students’ tuition fees, while fees for years seven through to 13 sit at $31,544. Boarding is an additional $21,608 annually and families are charged a $1000 ‘building fee’ per student.
Research published by Public Trust in 2023 shows 95 percent of Millennial homeowners received financial help to purchase their own home, followed by 79 percent of Gen Z homeowners.
The transfer of cash and assets between generations is set to contribute to a widening wealth gap, with young people who do not receive financial support from their family less likely to be able to get onto the property ladder.
It risks solidifying a two-tier system in which some young New Zealanders can draw on untaxed family capital, while others rely solely on wage income and debt.
The Public Trust research shows awareness of inheritances skipping a generation sitting at around 19 percent. That was three years ago; the government entity expects it will be on the rise.
Chief executive Glenys Talivai says that as younger people struggle to buy homes or private education, more grandparents are stepping in.
“We are seeing more and more grandparents looking to assist grandchildren with those pieces – housing, and equally education or other things their grandkids might be involved in,” she says.
“They might be over 80, their children have already retired and so they might skip a generation, because actually everything’s shifted to happen much later in life. That’s something we’re definitely seeing.”
Dodging succession dramas
She recommends professional advice for families considering this kind of giving and says trust structures can be “really, really helpful”.
“Grandparents could create a trust structure that means that both their children and their grandchildren, or even great-grandchildren, could be beneficiaries or discretionary beneficiaries of those trusts.
“They can get support as and when they need it from within; it’s almost like an advance rather than waiting until you pass away.”
Talivai says disputes most often arise when assets or family heirlooms have not been clearly dealt with in a will.
“The more explicit you are, the better, and if you’re able to have conversations with your family while you’re still alive, that reduces the possibility of disputes.
“It’s about really thinking through within your family, what are the things that are really important and what might people expect to be passed on? Sometimes those aren’t the things of the greatest value, but within that family there is a lot of value because of what they represent.”
Talivai says an example of this in her own family is a motorbike her father built, which for her is attached to core childhood memories.
“That’s one thing that I’ve said to my parents that I would like to inherit, to keep, rather than it being sold and money being distributed between me and my other siblings.
“It’s not a huge high-value item, but it’s something that I would be quite upset about if it left our family, whereas other siblings might not feel the same way about it.”
