8th November 2013
More than a third of parents (35%) and two fifths (43%) of grandparents would not ask anyone within their family for advice about finances according to a new report The Family Financial Tree from Standard Life.
Despite evidence that a large volume of money is moving freely between generations, only one in four people say that their family financial plans involve all the generations. However, the attitude of new parents is very different where 79% with children under the age of 5 would ask the family for money and three quarters would ask the family for financial advice.
From the research, Standard Life has identified three distinct types of families; “talkers” and “gifters” who are likely to benefit from discussing the family money tree and “avoiders” who are failing to release the power of the family financial tree.
“Talker families” are the 25% of the population who involve all of the generations when planning family finances – they are likely to be open with each other, discussing salaries, upcoming bills and even inheritance.
“Gifter families” are families who gift money between the generations to help with both big and small purchases, whether it be a mum paying for gran’s supermarket shop or a granddad contributing to his granddaughter’s education. “Gifters” are also likely to be “talkers”.
“Avoider families” however are the least likely to benefit from the family financial tree as they avoid money chat in their household, particularly the more difficult conversations. This means they could be missing out on the combined strength of planning for the future together and could be making decisions based on little information about future commitments or needs.
Sarah Willingham, personal finance expert, who helped write the report, said: “This research acknowledges the real experience of dealing with our finances as a family. Whether you’re the Crawleys of Downton Abbey or the Dingles from Emmerdale, loved ones often want to help each other out. It’s clear that a great deal of money is flowing between the different generations. So it makes sense to discuss our plans and needs as a wider family. How else can we make sure we are laying the foundations to help our family in the future and making the most of our money?”
Julie Hutchison, Standard Life Family Financial Expert said: “The Family Financial Tree has revealed the staggering amount of money that is shared within families every year. Grandparents and parents help younger generations with their financial needs and vice versa. But, despite so many people being on the family payroll, there often seems to be a barrier when it comes to having certain conversations about money. But if some of the trickier discussions do take place, around such things as inheritance or retirement, they can help to remove uncertainty and make it much easier for everyone in the family to plan ahead and make the most of their money.”
She adds:“If you really feel you can’t have these tricky conversations with your family, then turning to a third party like a financial adviser could be the solution. That said, a financial adviser will still seek to understand some key things about your family, like future goals and future commitments. So certain conversations will always be important in a family.”
Family tree – the roots and branches of support
Nearly half of grandparents (47%) have given money to their adult children and gave an average of £1,222 to each child in the past 12 months
Grandparents have contributed to grandchildren’s pocket money (43%), school uniforms and clothes (33%), holidays (30%) with one in six (15%) having contributed to a ‘first car’ in the last 12 months
One in eight (13%) grandparents contribute to their grandchildren’s travel costs so they can visit them
A third of parents (34%) have given money to their parents (the grandparent of the family) and gave an average of £428
Parents have contributed to their parents shopping (16%), holiday (10%), utility bills (9%) with one in 12 (8%) having contributed to recreational activities such as bingo, sport and hobbies
Over one in four (28%) grandparents have helped their parents out financially, contributing an average of £911 per parent in the past year.
Family circles – how money is passed around in families
More than half (56%) of grandparents believe they are providing more financial help to their children and grandchildren than their parents or grandparents gave them, showing the importance of supporting their family
One in four (25%) grandparents and one in ten (10%) parents have chosen to pass on some of their wealth to their children now, rather than wait to do so via their will.
Almost three in five (59%) grandparents have written a will to benefit their children. Recent ONS stats show that 160,000 people received inheritances exceeding £125,000 in the two years 2008-2010.
One in four people (25%) say that planning finances involves all the generations including grandparents
Yet, less than half (45%) of grandparents have discussed inheritance with members of their family, of which, 73% of those who discussed it raised the subject themselves.
Five essential conversations Standard believes families should be having about money and the future
If someone in the family was in need of financial help, would they know who to turn to? (42% of adults wouldn’t turn to family if they needed any financial help)
Are the grandparents of the family going to be able to afford to look after themselves in old age? (1.8 million pensioners in the UK live in poverty [Age UK] yet only 33% of grandparents in the UK say they would turn to family if they needed any financial help)
Children are expensive. As they reach adulthood, can the family help finance major life events? (University, first home, starting a family)? (45% of grandparents have given money to their grandchildren in the last year contributing an average of £452 to each grandchild)
Who will look after the children of the family if anything should happen to their parents? (Only 39% of parents/step parents have written a will)
Where do your loved ones keep important financial paper work, relevant passwords and their will? (22% of people only discuss finances with the family when it becomes necessary, e.g. once a problem has occurred)