IF you have young children the chances are you are more cash-strapped than your parents or grandparents were at your age, writes Gary Welford, an Investment Manager at Brewin Dolphin in Newcastle.

In the modern world more and more families have two working parents who, even with two wages, struggle with the costs of childcare.

My better half works two days a week. We are very lucky in that, after a strategic relocation, our parents are close enough (and willing) to look after our bundle of joy one day each.

According to a study by the Family and Childcare Trust the cost of a part-time nursery place for a child under two has risen by 33 per cent since 2010, and now costs more than £6,000 a year. Over the same period wages have remained largely static. A recent report from Halifax found that parents spend an average of £41,139 per child on childcare until secondary school.

As a result of these soaring childcare costs many families are depending on their parents for help.

Research from insurance firm RIAS found that more than two thirds of grandparents are helping out with childcare, looking after their grandchildren for an average of 9.1 hours a week – 49 per cent longer than in 2009. Of these only 1 per cent are paid for their time, meaning grandparents are saving their children an average of £1,902 a year.

It doesn’t stop there. Grandparents aren’t just donating their time to help out with childcare. Looking after grandchildren is costing them, too. According to RIAS they are spending an average of £88 a month contributing towards their grandchildren’s toys, clothes, pocket money, savings and activities.

I am sure grandparents reading this will concur. I regularly walk through the door on a Tuesday evening and hop skip and jump over the debris my child has left as my parents try to entertain him through the difficult 5pm to 6pm period.

As the data has shown, many over-55s provide hands-on childcare for their grandchildren, but this isn’t always possible. You might live too far away, or simply find the practicalities of looking after small children exhausting.

Contributing to your grandchildren’s childcare bill can be a great way of reducing your inheritance tax (IHT) liabilities. Under inheritance tax rules, you can give money away without it being liable for IHT if it forms part of your ‘normal expenditure’. This is money that comes from surplus income, doesn’t reduce your standard of living and forms a pattern of regular spending. In practice this means you can make a regular contribution to childcare bills and in doing so pass wealth down without the chances of the money being classed as part of your estate if you die.

This useful, but normally forgotten, exemption is not granted automatically and there are many additional issues to be considered with a Chartered Financial Planner. Never the less, it’s another option for the golden generation to consider during their peaceful retirement.

The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.