How to help your family financially

By TP Financial Solutions

05 May 2023

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New research from Quilter* has found that over a third (37 per cent) of those aged 18 to 34 either have, or think they will need to, ask for financial help to deal with the current cost-of-living crisis.

And perhaps surprisingly – rather than 20-and-30-somethings going online, or seeking help from famous TV personalities such as Martin Lewis – research suggests that younger generations are most likely to turn to family members for guidance in their financial decisions.

For Generation Z (18-24-year-olds), family was by far the most popular option to ask for help, with four in ten (39 per cent) saying they turned to this source compared to just 26 per cent putting their trust in TV experts. Even 25-34-year-olds were more likely to use family members over any other source, with 44 per cent choosing this option.

As well as giving younger family members guidance, where older generations are not under as much financial pressure during the cost of living crisis, there may be an opportunity for them to help provide financial help to younger generations in need of a savings boost.

Older generations seem open to the idea, with 59 per cent of those aged 55 plus believing that it is important to provide financial gifts to loved ones, and 29 per cent of respondents believing it to be very important.

What financial support can you give to loved ones?

There are several options available that can be particularly useful if you are keen to provide for your loved ones. For example, any gifts you make – as long as they are made at least seven years before you pass away – are tax free, and you have a tax-free gift allowance of £3,000 per year**.

As a couple, you can combine these allowances to give you £6,000, and it’s worth remembering that it is possible to use unused allowances from a previous year too. You can give these gifts or money to one person or split the allowance between several people.

Additionally, the small gifts allowance means you can give as many gifts of up to £250 per person as you want each tax year, as long as you have not used another allowance on the same person. You are also free to make additional payments that are not liable for inheritance tax if they are regular and use excess income.

Where somebody is getting married or starting a civil partnership, you can give a tax-free wedding gift of up to £5,000 to a child, £2,500 to a grandchild or great-grandchild, and £1,000 to any other person each tax year.

Alternatively, if you would prefer your loved ones receive the financial support in the future, you may wish to consider making contributions to a child’s or grandchild’s pension pot or placing the money into a trust. For example, minors’ pensions can receive contributions up to a maximum of £3,600 per tax year with no tax penalties.

Financial advice can help the whole family

As highlighted by the research, families play a vital role in providing financial knowledge and security. Younger generations’ habits are often formed by what their parents did and as such it is natural they want to seek their advice on financial matters.

Working with a financial adviser and planning finances across multiple generations is a great way to build on that knowledge and ensure the family unit can work together for each other and themselves. As well as ensuring everyone is getting the right advice, financial advice can help ensure tax allowances are being used effectively across family members.

Everyone’s financial future is unique to them and as such engaging with a financial professional will enable you to create a tailored and individual financial plan that is specific to your circumstances. With people’s finances becoming increasingly complex, particularly when looking across generations, financial advice is crucial to ensure your money works as hard as it can.

*Research completed via YouGov in November 2022 with 2176 adults. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2176 adults. Fieldwork was undertaken between 9 - 15 November 2022.  The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

** All figures quoted in this article relate to the 2022/2023 tax year and may be subject to change in the future.

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