How to help your adult children financially without compromising on your own goals

As a parent or grandparent, you no doubt want the very best for the children in your life. So, when those children reach adulthood, you might want to support them in any way you can to ensure they’re able to reach their goals and enjoy the same standard of living that you have.

However, the past few years have been tough for young people. Monthly inflation figures exceeded the annual 2% target for nearly three consecutive years, from May 2021 until April 2024, and this directly affected young adults’ ability to reach their financial goals.

According to NatWest, half of 16 – 25-year-olds said that this cost of living crisis had a worse impact on their lives than the pandemic did.

This might have led you to consider opening the so-called “Bank of Family” and offering financial aid to your children or grandchildren, giving them a helping hand with some of the more expensive purchases they might face in their lives.

Most commonly, this is a deposit for a first home, but it could also be for other significant expenses that they might face throughout their lives, such as:

• Buying a first car
• Going to university, whether that’s paying toward tuition fees or living costs
• Getting married, from paying toward the venue to suppliers, suits, and dresses
• Supporting them by allowing them to live at home as they build their wealth in the early stages of their career – indeed, the Guardian reports that the “Hotel of Mum and Dad” is at its fullest for two decades.

There is nothing wrong with supporting your loved ones in this way, using your wealth to give them the opportunity to succeed financially in the long term.

However, it’s crucial to ensure that doing so does not disrupt your ability to reach your own goals. Otherwise, you could end up sacrificing your own lifestyle, either now or in future.

Read on to find out why you need to be careful when financially supporting your adult children so you can still achieve your goals, and how a financial planner can help.

The Bank of Family is set to lend £30 billion toward property purchases in the next 3 years

While you might financially support your child in any number of ways, helping them buy a property may be near the top of the list. Indeed, the Bank of Family is set to make some hefty donations toward property purchases over the next few years.

Research carried out by Savills and reported by Mortgage Solutions found that the Bank of Family gifted £9.4 billion to first-time buyers in 2023 – an average of more than £57,000 each. By 2026, the Bank of Family will have lent an eye-watering £30 billion to younger family members looking to get on the property ladder.

These figures are significant sums, and only account for money given for property – if you wanted to help with a property purchase and perhaps another of your child’s main goals, you can see how these expenses could quickly add up.

Gifting wealth to your family members could force you to put your own plans on hold

Buying property might not be the only goal that your child has, but it provides a useful benchmark to explore how gifting wealth as the Bank of Family could affect you. So, using the £57,000 figure above, it’s worth considering what it might mean in practical terms to give this money away.

For example, the Pension and Lifetime Savings Association (PLSA) produces an annual Retirement Living Standards report that can give you a rough idea of the annual income you would need to achieve a certain standard of living in retirement.

In 2024, the PLSA figures showed that the cost of a “comfortable” retirement was £59,000 a year for a couple, or £43,100 for a single person.

While these figures are not personalised to you and how much your lifestyle would cost, they do provide a good point of comparison for that £57,000 gift to your child – it could cost you an entire year of retirement income if you’re a couple, and even more if you’re single.

Knowing that you have sufficient savings to live your desired lifestyle in retirement is a key indicator for happiness in later life. Indeed, in research by SunLife, “money/security” ranked second in a list of what brings over-50s the most happiness.

As a result, gifting money to your loved ones could affect the income you’re able to enjoy and directly influence your happiness in later life if you don’t make your gifts prudently.

You might worry about money if you think you have given away too much. In this case, you might end up trying to live a less expensive lifestyle in an attempt to make your wealth last. Ultimately, you might discover that you didn’t need to do this, and that you could have afforded to gift wealth and maintain your standard of living.

On the other hand, you could find yourself with a shortfall down the line if you have gifted more than you can actually afford. This could lead to you having to make cutbacks in your older years, which could put a strain on your finances and also your mental wellbeing – worrying about money in later life may be very stressful.

Either outcome would be an example of not reaching the goals that are important to you.

Careful planning can allow you to help your loved ones and hit your targets

You may feel obliged to help your children or grandchildren to thrive financially. Events such as the cost of living crisis may make you feel that you need to step in and provide support, as not doing so could be the difference between them achieving their goals and falling short.

Equally, helping a child financially may be one of your targets for the future. In fact, the SunLife research referenced above found that “family/friends” topped the list of what makes over-50s happy.

Whatever your motivation for doing so, the key here is careful planning. By accurately assessing how much wealth you have, what you need to achieve your goals, and how gifting significant sums away would affect you overall, you can then make an informed decision as to who you make gifts to, and for how much.

This is where financial planning can add real value. When you work with us at Caliber Financial Management, we’ll start by asking you about your goals for the future, before then considering how your finances are currently structured.

Crucially, we can use cashflow modelling software to assess the sustainability of your wealth for the long term. We can adjust this model based on differentials such as inflation, investment returns, and indeed your decisions, such as whether you choose to gift money to a child or grandchild.

In doing so, you’ll be able to see the impact of this gift on your entire financial situation. You might discover that it’s a viable option, or it could be that you need to rethink your savings and investments to ensure you can make the gift without affecting your standard of living as a whole.

Planning like this can ensure you’re able to achieve your ambitions for retirement if you want to make gifts to your loved ones.

Get in touch

Would you like support organising your wealth so you can reach your goals? Talk to us at Caliber Financial Management.

Email contact@caliberfm.co.uk or call 01525 375286 to speak to one of our team today.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.