27th May 2013
Parents are providing a huge bank of financial help to their adult children as research by Standard Life illustrates. To coincide with National Family Week, the insurer has compiled a list of rather eye-opening statistics about just how much older parents are making to help. It says that currently 30% of parents in the UK making financial sacrifices to support their adult children, while 31% of people have made sacrifices in the past. It says 62% of parents are giving, or plan to give, their grown up children more financial help than they received from their own parents.
More than half or 52% of parents who have or plan to help support their grown up children feel “it is their duty as a parent” to financially support them. Thirty-five per cent worry that without financial help their children would suffer and not achieve their full potential. Slightly more or 37% recognise that given the current economy their children will not be able to fund themselves straight away.
On average, Standard Life says parents estimate they will invest around £15,490 in each adult child. Some 38% expect to help or have helped foot the wedding bill – the most significant cost, with university fees second. More than one in three (37%) parents pay University or education fees or expect to do so. Just under a third (32%) are paying towards university accommodation and living costs or plan to. Over a third (34%) also pay towards their child’s car or expect to do so. More than a quarter (26%) are likely to pay or have paid towards a deposit for a first home. A quarter (24%) expect to help or have helped with mortgage, credit card, and other debts.
Standard Life’s Julie Hutchison says: “National Family Week celebrates families across the UK and recognises the valuable support they can give each other across the generations. Our research shows that parents in the UK are not only providing emotional support but also significant financial help for their children. For many this continues even once their children have flown the nest.
“The challenge for all parents these days seems to be balancing their own long term financial planning needs with the needs of those they continue to support. And this often doesn’t stop at their children. Many are also supporting their own parents or elderly relatives too. That means that today’s parents need to make sure that their money works as hard for them as they are working for their children and everyone else they are supporting.”
Standard has also compiled a number of top tips for peoples’ finances.
Top tips for families looking at their finances:
In the current economic environment, of low interest rates, high inflation, people need to make their money work as hard as it can to help themselves and their families. Any money in a savings account or even a tax efficient Cash ISA is likely to be being eroded in real terms. So you should review how much risk you’re able to take with your savings and consider alternatives such as Stocks and Shares ISAs (where you will not have to pay any tax on income or capital gains) or Bonds which have the potential to produce higher returns in return for you taking more risk. Risk managed funds are becoming and increasingly popular choice as they match your risk profile. If you are at all unsure, you should seek professional advice.
If you are thinking about creating a nest egg for your children, perhaps to fund university or help them purchase their first home in the future, then you might want to consider a Junior ISA. For tax year 2013/14, family and friends can contribute up to £3,720 for a child’s Junior ISA.
Alternatively, you could set up a trust. A trust is a simple way of holding funds which are for the benefit of someone else. The trustees (who are often the parents or grandparents) can control how someone gets access to the trust. This could be delayed to an older age. There are some inheritance tax points to understand if you’re using a trust, but the benefit is that funds could then be drip-fed out, rather than taken as a large lump sum.
Remember that grandparents may be able to help out too, by setting up a pensions savings pot that their grandchildren can benefit from in later life. Family or friends can pay in up to a total of £2,880 every year. And whatever is paid in, the government will add another 25% to it. The earliest the grandchild can have access would be age 55.