Research by pension provider Canada Life reveals that nearly 4 in every 10 parents have already given significant financial gifts to children.

A common reason was to help children or grandchildren buy a property, with 17% saying they’d helped with a house deposit and 13% saying they’d helped to buy a house outright.

While laudable, the research also provides something of a warning. Of those who had gifted, 15% had to cut back financially afterwards, and 17% said they would be short of funds if faced with a financial emergency.

This dovetails into research by retirement firm Just Group, which found that 70% of parents who gifted more than £5,000 had not considered their financial future. In particular, they hadn’t factored in the potential cost of long-term care.

Read on to discover three ways you could ensure gifting to loved ones won’t leave you financially vulnerable in the future, and how a financial planner can help.

1. Create or update your long-term financial strategy

Perhaps one of the most effective ways to ensure you know how much money you’ll need in the future is to create a long-term financial roadmap.

By doing this, you can estimate how many holidays you would like to have later on, how often you’d like to eat out, when you might want to replace your car with a new one, and when you might want to do work on your home.

Creating a strategy allows you to consider how your existing income, assets, savings, and investments might maintain your lifestyle in the future. Doing this will allow you to decide how much money you will need, providing peace of mind that any gift you make won’t put your standard of living at risk.

2. Ensure you have enough money for emergencies

Preparing yourself for the unexpected, whatever your stage in life, is essential to good financial planning. Despite this, a report by Money Age revealed that nearly half (46%) of retirees in Britain do not have enough in their emergency fund.

Ideally, your fund should have between three- and six-months’ worth of household expenditure, and be in an easily accessible account. Having it in investments or fixed-rate savings accounts could mean you lose money if the market drops when you need to access them, or you might be charged early exit fees.

Having an adequate emergency fund provides peace of mind that, whatever happens, you’ll cope financially, and won’t become one of the 17% of people who could struggle in a financial emergency.

3. Consider your future care needs

In September 2021, the government announced care reforms that included an £86,000 limit on certain care costs. This means that, from October 2023, the government could pay for your care once it exceeds this amount.

While this may sound like good news, the Telegraph pointed out at the time that the limit only applies to the cost of “personal care”. While this includes washing and eating, it does not include the cost of food, rent, or energy bills, which will typically be paid by you.

Retirement firm Just Group suggest that, if you pay £1,100 a week for residential care, around £350 will be classed as “personal care”. As a result, just £18,000 of your £57,000 annual care bill would be classed as “personal care”, and you would have to foot the bill for the rest.

While the government has promised to look at a limit for non-personal care costs, it might not negate the need for you to fund your own care. That’s why it’s essential that you have enough money to cover your long-term care costs.

It might mean, for example, you can choose where you receive your care, if you wanted better surroundings or to be in a home that’s located closer to your family.

Get in touch

If you would like to make a gift to family or friends and would like to discuss whether doing so might jeopardise your financial future, please contact us by calling 0800 434 6337. We would be happy to confirm whether gifting the amount you’re considering is right for you, and what other alternatives might be available to you.

Please note:

This article is for information only. Please do not act based on anything you might read in this article.