New study suggests the over-55s are making cutbacks on their lifestyle to fund gifts for their children and grandchildren.
Parents and grandparents are risking their own standard of living by being too generous with their money, according to a new study.
The research from Invested Wealth & Investment found that older people are handing over staggering amounts of money every year to their children and grandchildren. In fact a third of over-55s are giving away more than £5,000 a year on average. Of those generous people, 18% plan to take advantage of the new pension freedoms to give away even more money from their pension pots.
Giving away too much
“It’s understandable that many grandparents want to give their grown-up children and grandchildren a helping hand financially, particularly with big ticket items such as house deposits and education fees,” says Chris Aitken, head of financial planning at Investec Wealth & Investment.
[SPOTLIGHT]But all this generosity comes at a price. One in five think they are giving away too much money, while 11% have had to make cutbacks to their own lifestyle in order to fund the gifts.
Half of those parents and grandparents who admitted to having to make cutbacks said they had reduced their travel plans. Meanwhile 42% were having fewer meals out, 39% had cut back on their home improvement plans, a quarter weren’t buying as many new clothes as they would like and 21% were cutting back what they spent on their hobbies.
Worryingly, 11% said they had been forced to reduce what they spent on food shopping as a result of giving too much money to children and grandchildren.
“Generosity has its limits and we would strongly advise people to stick to what they can afford without affecting their own quality of life,” says Aitken. “This means planning to have enough capital to enjoy a long and active retirement, not forgetting that they may also need to factor in the cost of long term care.”
Almost a fifth of over-55s admitted that they are planning to use the new pension freedoms to cash in part of their pension pots in order to give their children and grandchildren money.
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