Can You help Your Children Financially Without Harming Your Own Future?
Shaun Wood, Simpson Wood Financial Services.
For younger adults facing high housing costs, expensive childcare and arguably a rougher path to home ownership than previous generations, family support can make all the difference. It is understandable, as well as increasingly common, for parents to want to help their children financially. The desire to do so is both generous and well-intentioned. An important question comes into play, however, and it’s one that should never be ignored in these kinds of situations: can you help them without damaging your own future?
The modern squeeze
Many people in their 50s and 60s now find themselves pulled in two directions at once: helping adult children while also thinking about ageing parents, retirement timing and later-life care costs. This can make them a financial bridge that stretches across different generations. The challenge around this is that what feels affordable today can look very different in 10 or 15 years’ time; and the pressure around this should not be underestimated.
Gifts, loans and expectations
If you are thinking of gifting money to your children, being clear about exactly what’s happening is essential. Is the money being gifted outright? Is it a loan that will be repaid at a later date? If it is repaid, when and on what terms? Is the arrangement understood by all family members and is anything written down? Vague agreements based on assumptions and trust have a habit of becoming expensive both financially and emotionally. And when there is more than one child, fairness often needs to be thought about, too. While equal treatment doesn’t always mean identical treatment, unspoken or ill-explained differences can create challenging tensions further down the line.
Do not raid today to fund tomorrow
One of the most common mistakes is reducing pension saving significantly, or drawing on long-term assets too early, in order to provide immediate help. Sometimes that may be entirely appropriate. Sometimes, however, it simply shifts pressure from one generation to another.
Retirement can last much longer than it used to. Decades, in some cases. Income needs, inflation and care costs are difficult to predict precisely. Money that may appear surplus during peak earning years may later prove to be vitally important. Helping one’s family is an admirable desire but doing so at the cost of becoming financially dependent on them later on is usually not intended to be the plan.
Use the available rules sensibly
There are useful allowances around gifting and tax planning depending on the circumstances. For example, annual gifting exemptions may be relevant, and larger gifts can have estate-planning implications. Equally, support does not always need to be cash. Paying for professional advice, childcare, education, or helping someone structure a plan can sometimes be more valuable than simply transferring money.
Security first, generosity second
Family support needs to happen in this order: stabilise your own position, then help from a position of strength. That means understanding your likely retirement needs, maintaining adequate emergency funds, and being realistic about your future obligations before making large commitments. Support that’s given from a position of confidence tends to feel better all round, for everyone involved.
Most parents want to see their children thrive. That’s only right and natural and it’s an instinct that doesn’t disappear with age. The strongest and most meaningful long-term support is often not the largest number on a cheque, however, especially if it compromises your own security now or later on. It’s essential to prioritise your own financial sustainability, not only for your own sake, but for the sake of your whole family in the years to come.
Shaun Wood is Managing Director and Chief Investment Officer at Simpson Wood Financial Services, based in Huddersfield.
He works closely with business owners, families, and individuals to help them make clear, confident decisions about their financial future. With a focus on long-term thinking and thoughtful planning, Shaun believes that good financial advice should create clarity and reassurance.
Every month Shaun is going to guide us through the often intimidating word of finance….. it’s not scary if you’re educated on it. Just like anything, so let’s get educated!
Small Ideas that Make a Big Difference to Your Finances
It is not unusual for finances to be thought of as complex and opaque. While it is true to say some financial products can be presented as somewhat mystifying, and dealing with large sums creates added complexity, most financial outcomes are shaped by a surprisingly small number of underlying ideas. They are not especially dramatic but, over time, they make a significant difference to your financial health.
Compounding
This simply means that returns generate further returns over time. Money grows, and then the growth itself begins to grow. What makes this so powerful is time. The longer money is left invested, the more opportunity there is for that process to take hold. It’s why someone who started saving or investing earlier, even in relatively modest amounts, can often end up in a stronger position than someone who starts later with larger contributions. Here’s an example:
- If you invest £1,000 and it grows by 5% in a year, after year one you don’t have £1,000 anymore, you have £1,050.
- In the second year, the 5% return isn’t just applied to your original £1,000. It’s applied to £1,050. So now the growth itself starts producing growth.
- After ten years, your £1,000 has turned into £1,629. After 20 years, it’s £2,653. After 30 years, it’s £4,322.
The growth in those last 10 years is bigger than the first 20 years combined. That’s the power of compounding and time is its fuel.
Consistency
There is a mistaken assumption that financial progress comes from major decisions or well-timed moves. In reality, it tends to come from simple habits repeated over many years. Regular pension contributions, steady investing, and periodically reviewing your financial position may not feel especially exciting, but they are often what creates momentum over time. Financial progress rarely arrives in sudden leaps; more often it accumulates gradually through consistent decisions. It is easy to underestimate the power of steady financial habits because their effects are rarely dramatic in the short term. Yet over years and decades, small and consistent decisions such as increasing pension contributions or fully reviewing finances once or twice a year, often have a greater impact than occasional bursts of financial enthusiasm.
Clarity
Anxiety around money is often less about the numbers themselves and more about a feeling of uncertainty about where you stand. Pensions from previous jobs, investments held in different places, or plans that were made years ago and never revisited can easily create a sense of financial fog.
It’s understandable that people sometimes avoid looking too closely. Life is busy and it can feel intimidating. Yet the simple act of bringing everything into view is often the point at which confidence begins to return.
Simply taking the time to understand your position (what you have, what it’s for, and whether it broadly aligns with where you want to go), often brings a surprising amount of reassurance. Even if nothing changes immediately, clarity has a way of restoring a sense of control.
None of these ideas are complicated, which is precisely the point. Financial wellbeing most often comes from understanding a few simple principles and applying them steadily over time. Start early where you can, remain consistent where possible, and make sure you understand the ground you’re standing on. Do that, and you’ll be surprised at the long-term results you achieve.
The Meaning of Money – Shaun Wood
I spend my working life talking to people about money. It means different things to different people and rarely is this meaning about the numbers alone. Amongst other things, money can represent security, freedom, more choice, control, and protection. What seems to be universal, however, is the idea that money is something you’re somehow meant to already understand. When you don’t, it’s easy to assume the problem is you.
The reality is that there is no gene that makes you inherently able to come cold to pensions and know how they work or what the best one is for you; and there is no reason why you should automatically feel confident about savings, debt or investments if they’re not already your field of expertise. Add to this the normality in modern life of financial decisions being dealt with in the in-between moments of the day — a snatched hour after the kids have gone to bed or during a lunch hour at work — and there’s not much room for considered, in-depth decision-making, let alone a self-directed financial education that would ensure you’re getting the most from what you have. The challenge with this, however, is that it can mean money becomes overwhelming, especially at times of change or transition.
A helpful initial shift can be to stop thinking about money as something you have to solve in its entirety and start thinking about it as something you can get a little clearer on one step at a time. A good starting point is to ask yourself a few questions:
- What do I need my money to do for me right now?
- What feels uncertain or uncomfortable?
- What am I avoiding looking at and why?
There’s a misconception that anxiety around money is about the numbers themselves. More often, it’s about feeling like you’re in the dark about where you stand. Sound financial planning is about understanding your current position well enough to be able to make intentional choices. Once your picture is less blurry, any anxiety tends to wane, whatever the reality of the situation, simply because the action of facing your finances and understanding where you are is connected to a feeling of control. It doesn’t necessarily follow that you should know all the “right” answers; yet people still often feel hesitant about asking financial questions. There is no shame in not knowing and there’s definitely no prize for figuring it out alone!
Money decisions don’t exist in isolation of the rest of life. They sit alongside work, family, health, ambition, fear and hope. Any financial conversation worth having has to take the whole picture into account, not just the spreadsheet.
Over the coming months, this column will explore money in that spirit. We’ll talk about decision-making, planning ahead, and creating steadiness even when life feels anything but steady. You don’t need to be perfect with money; just present enough to make the choices that are right for you.
