13 November 2024
general
In the past, you might have relied on the “Bank of Mum and Dad” to help you achieve some of your early financial goals, such as buying your first home. But research shows that many Brits expect this dynamic to change in the future.
A report from Aegon shares that 55% of adults support or expect to support their parents financially in their retirement. Of those who are already supporting their parents, 38% regularly pay for meals out and 25% are helping with everyday bills.
Though supporting your parents financially might be a priority for you, it could have an impact on your own financial wellbeing and your ability to achieve your goals later in life.
Read on to find out how your adviser can help you to provide the support your relatives need without jeopardising your own financial future.
Providing regular financial support to relatives could hinder your ability to achieve your own goals
Being able to support your relatives and help them to enjoy a good quality of life is one of the lovely things about building wealth.
But it’s important to balance this with your own financial needs. Without achieving the right equilibrium, you may not be able to contribute as much to your pensions and investments each month.
Even if you only reduce your contributions by a small amount or temporarily, you could face a significant shortfall in your savings by the time you come to retire. This could mean that it takes longer to save towards the lifestyle you want in retirement.
3 practical ways your adviser can help protect your financial wellbeing while you support your relatives
Fortunately, you needn’t choose between working towards your own goals and supporting your family. Here are some of the ways your adviser can help you to do both.
1.Create a cashflow forecast to understand how much you can give
A cashflow forecast is a helpful tool showing how your assets and liabilities are likely to change over the years.
Your adviser can enter data about your current income and assets, as well as liabilities like your mortgage and your anticipated income needs in retirement based on your lifestyle goals. They can also enter assumptions about inflation and investment returns to see how your net worth could grow.
At a glance, you’ll be able to see how your income measures up against your liabilities, helping you and your adviser understand how much you’ll need to save for retirement. You can also identify any potential shortfalls in income so that you can be proactive in avoiding this from happening.
This tool can also help you to understand how the financial support you expect to provide for your parents might affect your own financial wellbeing. By entering data about the financial support as an expense, you can see how quickly you’ll be able to accumulate the required sum to fund your own retirement.
Consequently, you may feel confident that the support you offer your parents isn’t going to jeopardise your own retirement savings.
2. Protect your income so that you can continue to support your family no matter what
When you have family members relying on you for financial support, your earnings become even more important. So, if you are unable to work because of an illness or injury, it can create a great deal of stress and worry.
Your adviser can help you protect your income so that even if you’re unable to work, you’ll still be able to cover your own bills and continue to provide financial support to your family.
Income protection could provide a regular payout to cover everyday bills and expenses, and critical illness cover could provide a lump sum to help you pay off your mortgage, secure private medical treatment, or make adjustments to your home if needed. Life insurance can also provide a lump sum payout to your family if the worst were to happen.
There are several different types of policies to choose from, each offering their own benefits and add-ons. The right financial protection for you will depend on your circumstances, and your adviser can help you identify what is most suitable. They can also help you to put the policies in place and claim on them if needed.
3. Review your finances regularly and tweak your plan if circumstances change
When you work with one of our advisers, you’ll have regular meetings to review the progress you’re making towards your goals. These meetings are also an opportunity to discuss any changes to your circumstances and how they might affect your finances.
For example:
If your circumstances change, or your parents require more support than they did previously, your adviser can help you to navigate this with sensible financial decisions.
Get in touch
Our team of advisers is here to help you plan how to achieve your long-term goals and support your family where needed. Email enquiries@jesellars.co.uk or call 01934 875 919 to find out more about how we can help you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate cashflow planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
