Parents who lend money to their children are at risk of compromising their own financial position, according to a survey by Investec Wealth & Investment.
Of the 1,000 adults surveyed, a third of those aged over 55 either plan or give money to their children at an average of £5,026 a year. 18% of those respondents will utilise the pension freedoms to make these gifts by withdrawing cash from their savings.
The survey also found that 18% think they currently give away too much money, with 11% admitting to cutting back on their capital to finance their loved ones.
The biggest cutbacks made include:
• 50% made cutbacks on travel
• 42% made cutbacks on eating out
• 39% made cutbacks on home improvements and refurbishment
• 21% compromised on hobbies
• 11% reduced costs on food shopping
• 3% delayed retirement plans to finance their children.
Nigel Holland from Holland & Co Chartered Accountants said:
It is a very natural reaction for parents to want to help their children financially, however this course of action can very often cause more problems than it solves. It does not encourage children to be independent, it encourages them to remain dependent upon their parents. It is a parents responsibility to teach their children to be financially responsible and independent from their parents.
The above survey shows that chaos is caused when children are unable to look after their own finances. The cutbacks should be made by the children not the parents. The children should concentrate on obtaining qualifications, skill themselves up and finding meaningful employment. The sooner they are able to stand on their own 2 feet in a financial concept the better.”