Gifting money to children without risking your future

Will helping my children financially put my future at risk?

It’s important to maintain a balance between building savings that are appropriate for your individual circumstance and sparing what money you can to help your children. Many people choose to consider their retirement savings and longer-term financial security before deciding how much financial support they may be able to give their family.

How should I prioritise helping my kids financially alongside my own monetary needs?

When considering gifts to family members, it may be helpful to assess the impact on your own financial circumstances and future financial needs. It’s important you consider funding your own pension and secure healthy personal savings for retirement before you decide on what money you can then give away to your family.

How do I know how much I can spare to help my children?

Taking regular inventory of your finances will allow you to safely budget how much you can spare to assist your children. One approach to consider is using funds that remain after meeting your regular expenses and savings objectives. In this way, you can facilitate long-term investment towards your children’s financial future without compromising your own personal financial security.

When could my financial support make the biggest difference to my children?

Rather than regularly depleting your funds with minor gifts, some people choose to provide financial support towards major life events, such as education costs or property purchases. Assisting your family with these large, long-term financial targets could be managed as part of your own savings plan, allowing you to safely and gradually build up money to help.

Can I give too much help at the risk of my own financial security?

Absolutely. It's imperative that at a minimum you don't dip into your own personal emergency funds when helping your children financially. These emergency savings act as a cushion against unexpected future costs, for example home maintenance or medical bills.

In what ways can I support my children’s finances?

Once you’ve taken stock of your own financial situation, be it through personal budgeting or seeking professional advice, you may then be a better position to offer them direct support. At the time of writing, individuals may be able to make use of certain inheritance tax gifting exemptions, including an annual exemption of £3,000. This means you could potentially give this much each year once your own personal expenses have been met. You should consider seeking independent tax advice where appropriate (see GOV.UK - Rules on giving gift). Larger gifts may also be exempt from inheritance tax provided you survive seven years after giving them. Some individuals may wish to consider the available inheritance tax exemptions when planning gifts to help with those landmark purchases to leverage your gift allowance.

Summary: safely helping your children financially

Ask yourself these questions:

• Do I have enough saved to safely ensure a comfortable retirement?
• Is my pension strong enough that I can spare money for my family?
• When I calculate my expenditure on both personal expenses and paying into my savings, how much excess can I then safely spare on helping my children’s finances?
• Would the size and frequency of my planned gifts incur inheritance tax, either immediately or in the future?
• Can I also help save towards any long-term financial goals my children have?

Frequently asked questions

When is it the right time to start gifting money to children?

Whenever you feel financially secure to do so. Once your personal future financial savings are stable, you can begin to look at how you could aid your children. Utilise your own life experience to pre-empt what landmark purchases they might need to make in the future and perhaps open another savings account to begin working towards them.

Is it ok to loan money to my children?

If they need your financial support that you cannot outright give as a permanent gift, then loaning money for important purchases is a potential option. It's important to clearly communicate when you are gifting money to children, versus offering a loan.

How can I support my children if I’m not currently financially able to assist them?

Even if you’re going through a period where you cannot currently spare money to help them directly, your lifetime of financial experience can be an invaluable tool for teaching them how to manage their money. Guiding them on how to budget, as well as allowing them to stay at home while they save, can be great ways of supporting their financial future.

Next steps

If you’re currently reviewing how you can safely assist your children financially without putting your own future at risk, these Kent Reliance resources may help:

Explore all Kent Reliance products

Explore Kent Reliance savings accounts

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^*Tax treatment depends on individual circumstances and may change in the future.

This article is intended for general information purposes only and does not constitute financial, tax, legal or investment advice. Whether gifting money is appropriate will depend on your individual circumstances. If you're unsure, you may wish to seek independent professional advice.

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