A common issue amongst our clients is how much financial assistance to give to their children and grandchildren. The obvious areas to consider are education/university costs, wedding costs and then potentially the most expensive one; getting them on the property ladder by helping with a deposit. Our view is that the most important issue is to make sure that any gifts don’t jeopardise your own desired lifestyle. We’ve seen this go both ways: parents making large gifts that then created financial difficulties for themselves, and parents desperately wanting to help their offspring but feeling unable to do so because they were over-cautious. We deal with this situation by building a ‘lifetime cashflow forecast’, projecting your money into the future to see if we expect you to have A) too much, in which case you’d be able to gift; B) not enough and therefore gifting wouldn’t be advisable, or C) just about the right amount and maybe able to gift with some planning. We can then model various scenarios of gifting and ‘stress test’ the projections.
How much help is a good thing?
Then there is the emotional side to this. We have come across a variety of issues, for instance: Do you pay all university costs or just accommodation costs and a bit of spending money? Although sometimes not financially advantageous, is it a good thing for your child to use the student loans that are available, taking some personal responsibility? Views vary enormously on this. Even if you intend to pay all of the costs of university, is it better to hold something back until the end of the course as a reward for hard work rather than give everything up front?
Easy, or too easy?
easy? How easy (or not) do you want to make it for your children? How you and your parents dealt with money when you were growing up will often have a bearing on this. If you are the first generation in your family to have reasonable wealth, you may well want your children to appreciate the merits of hard work. Conversely, we meet clients who just want to give their children as much as they can reasonably afford to. Again, it’s a very personal decision. There is no right and wrong course of action but, by clearly showing you the financial implications of gifting and acting as your emotional sounding board, we can help you make these very important decisions. Please get in touch if you’d like to chat any of this through.