£1.9 billion gifted to younger generations during the pandemic
The pandemic and restrictions have meant many families are struggling financially or feel insecure. Research suggests that younger generations have been turning to parents and grandparents for a helping hand. However, some older family members haven’t fully considered the long-term impact that providing support could have on their own plans.
£1.9 billion gifted during the pandemic
According to Legal & General, 5.5 million older family members expect to provide additional financial support as a direct result of Covid-19 on top of the support they may already offer.
Gifting money to help children and grandchildren get onto the property ladder has become commonplace. However, the survey indicates that many are also providing a helping hand to cover day-to-day costs. The figures suggest 15% of the older generation expect to provide an additional sum of £353, on average, in financial aid. In total, that adds up to £1.9 billion being gifted due to the pandemic.
This is on top of support they may already be offering. More than a third (39%) of young adults regularly receive cash from family to help them get by. Collectively, older family members provide £372 million to loved ones each month. Some 29% of recipients use this money to pay for everyday essentials and 27% use it to pay their bills.
When loved ones are struggling with day-to-day costs, it’s natural to want to provide support. However, the research also suggests that some aren’t fully considering the short or long-term impact this could have. The survey found:
38% of those gifting money have made sacrifices in order to do so
31% have cut back on some day-to-day spending
21% admitted they have struggled to pay bills as a result
Understanding the impact a gift can have on your lifestyle before handing it over can mean you feel confident in your decisions. In many cases, family members offering support know they can maintain their current lifestyle, but taking some time to double-check can provide peace of mind.
Don’t forget the long-term impact of gifting
While the study focuses on the short-term implications of gifting, such as paying bills, you need to consider the long term as well.
If you’re taking money out of your pension, for instance, would providing gifts mean you could run out of money later in retirement? Or will cutting back now mean bigger expenses in the future? Again, many clients find they’re in a position to provide the level of financial support they want. But by understanding the long-term consequences, they can proceed with confidence, knowing that it isn’t harming other aspirations they may have.
Reviewing your financial situation now can also help you understand where to take the money from. You may, for example, have money saved in an ISA that you’ve been using, but the annual ISA allowance will limit how much you can replace at a later date. In some cases, this means it makes more sense to draw from other sources of wealth and assets. Reviewing your finances beforehand means you can choose an option that makes sense for you and your plans.
Make gifting part of your financial plan
When asked how they want to use their wealth, many clients will want to provide financial support to loved ones. In the past, this has often been achieved by leaving an inheritance. However, as young families face pressure now, gifting during their lifetime is becoming an increasingly popular option among clients and there are benefits:
You can see the impact your money has had for loved ones
It can help loved ones overcome challenges they are facing now, such as getting on the property ladder
It can reduce a potential Inheritance Tax bill
However, whether you want to lend regular financial support or give a one-off lump sum, gifting should be part of your long-term financial plan. It’s a step that can ensure your plans are viable and have considered other factors, some of which may be outside of your control. For example, if you want to make regular payments to cover school fees for grandchildren, it can allow you to create a plan that ensures this will be provided until they finish their education, even if something unexpected happens.
Please contact us if you’d like to discuss how to pass on money and other assets to loved ones. We’ll help you incorporate it into a financial plan that considers your goals and financial situation to deliver a blueprint you can have confidence in.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate or tax planning.