Savings & investment
Russell Bignall
I came across a rather striking statistic the other day.
Apparently, seven out of ten parents admit that they avoid talking to their teenage children about money.
More than a quarter (28%) do so because they don’t want to worry their kids, while 22% believe teenagers already have enough to focus on, according to a survey commissioned by savings and investment firm M&G.
It isn’t just parents who find talking about money problematic.
Recent research from Opinium found that 26% of people in long-term relationships (lasting two or more years) manage their lives together but not their finances.
And if that wasn’t bad enough, Co-op Legal Services found that one in three married people aged over 65 hide money from their spouse with more than one in ten having £50,000 or more stashed away on the quiet.
So while money talks, it seems we don’t talk about money.
The ironic thing is that staying silent about money in many ways can actually cost you money, not to mention the damage it can do to relationships.
And conversely, bringing the issue out of the shadows and into the light can bring multiple financial and emotional benefits.
This doesn’t mean that every conversation around the dinner table should go into the minutae of exchange traded funds or offshore bonds.
But talking things through with clarity and purpose – and taking action early as a result – can literally bring dividends.
I’ll give you an example.
Let’s say your first grandchild has been born. You want to make sure that when you are no longer here, they are provided for.
Instead of holding on to your money – and potentially letting the taxman enjoy an Inheritance Tax windfall – talk to your son or daughter about opening a child’s pension for your grandchild.
You can contribute up to £2,880 a year into that pension and, providing that doesn’t affect your day to day income, it will be free from Inheritance Tax.
What’s more, assuming you’re a basic rate taxpayer, the contributions will attract 20% tax relief from the Government so your £2,880 a year becomes £3,456 a year.
Continue that until your grandchild is 18 and that’s over £60,000.
Assuming the pension fund grows by an average of 6% a year, by the time your grandchild is 57, that pension will be worth over £1m.
Just think: a million-pound pension, all because you talked with your family about money.
Being open and upfront about finance can also be educational.
Let’s take the situation referred to at the start of this column.
What better way to introduce the topic of money to your children at an early age and talk about some of its essential features than to get them actively involved?
By opening a Junior ISA and sharing its progress with your children, you can educate them on the difference between saving and investing and how financial decisions may affect outcomes over time.
By the time they reach 18, they will hopefully have learned about what money can do for you (and what it can’t) and will be able to make sensible decisions on how they want to use their nest egg.
This isn’t about setting aside vast sums of money. The watchwords here are “early, little and often” – and it’s surprising how that builds up over time.
In my own case, the government of the day helped to give my kids a head start.
My daughters were born at a time when the Government gave every child a £250 voucher to invest in a Child Trust Fund (CTF).
We took advantage of this and invested £25 a month each for both daughters in CTFs.
Fast forward some 20-plus years and they now each have enough for a deposit on a house.
Talking more openly about money is also set to be even more important.
With the introduction of Inheritance Tax on unused pensions from April 2027, keeping mum about how much you plan to pass on to your family could leave them saddled with a substantial bill and a lot of complicated paperwork at a stressful and emotional time.
Having a family discussion could help to head off a lot of these issues – and give you and your family much greater peace of mind.
A financial adviser can help you to transform discussions into action and advise on the best path for you and your family.
However, one of the great things about having a financial adviser is that they can also act as a catalyst to have those conversations in the first place.
Having been in this business for over 25 years, I know that many people tell their financial adviser things they don’t even tell their own family.
The presence of an outside observer who possesses the expertise but doesn’t have the emotional ties is invaluable and often makes people open up.
A financial adviser who knows your wishes and who has worked on your financial plan will help you to facilitate those crucial conversations with family – and can also help the next generation to get a good financial start in life.
So if you’re finding it tricky to talk to your family about money, talk to an adviser.
It could be one of the most crucial conversations you ever have.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. Always seek professional advice before making financial decisions.
| Match me to an adviser | Subscribe to receive updates |
Open conversations about money can help families make better financial decisions, understand each other’s wishes and plan ahead for issues such as inheritance, pensions, savings and investments.
Start with simple, age-appropriate conversations about saving, spending and investing. Involving children in a Junior ISA or another savings or investment plan can help them understand how money can grow over time.
Practical experience can be a useful starting point. Showing children how regular contributions to a savings or investment account grow over time can help them understand concepts such as compound growth, investment risk and the difference between saving and investing.
Yes. A grandparent can contribute to a child’s pension, subject to the relevant pension rules and allowances. Personal contributions of up to £2,880 a year can currently receive 20% tax relief, potentially making the contribution £3,600 gross.
Potentially. Gifts can have different Inheritance Tax implications depending on the circumstances, including whether they are considered normal expenditure out of income or fall within other gifting exemptions. Anyone considering gifts as part of an estate plan should take professional advice.
A Junior ISA is a tax-efficient savings or investment account for children. Money invested in a Junior ISA belongs to the child and can generally be accessed when they reach 18.
Talking about inheritance plans in advance can help family members understand what is intended, identify potential tax issues and reduce confusion and disagreements at an already difficult time. This can be particularly important as the tax treatment of pensions and estates changes.
A financial adviser can help families understand their options around pensions, investments, savings, gifting, Inheritance Tax and estate planning. They can also provide an impartial setting that makes difficult conversations about money easier to have.
Generally, the earlier you start, the more opportunity there is for regular contributions and investment growth to compound over time. Even relatively small amounts can become significant over several decades, although investment returns are not guaranteed.
There is no universal amount. The appropriate level depends on your own financial circumstances, objectives and whether giving money away could affect your future financial security. Professional advice can help you balance helping the next generation with maintaining your own financial resilience.
For further information, please contact:
Savings & investment
Pension & retirement
Planning & protection
Pension & retirement
Savings & investment
Pension & retirement
For further information, please contact: