The value of talking to your family about big financial decisions

Talking openly about money has traditionally been a bit of a taboo among the stiff upper-lipped British. But times are changing, especially within families.

Part of the reason for this is that family members’ finances are becoming increasingly intertwined. This means financial decision-making involves more than just a single head of the household.

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Why are people more willing to talk to their families about money?

OneFamily’s research found that around half of first time buyers rely other family four financial support when they are buying a new home. Primarily, it is still the older generations supporting children and grandchildren. Sons and daughters over the age of 18 were most likely to receive financial support from their parents or grandparents (they made up 46% of the total).

But it’s not a one way street, with 25% of families saying different generations support each other. This suggests financial help works the other way round too.

A leg up on the ladder

As family dynamics change in this way, money is now increasingly seen as an acceptable topic of conversation around the dinner table. OneFamily’s study found that 58% of people say their family talks openly about their finances, while 18% said they all know how much each other earns.

This is a good thing, because families might have to make any number of big financial decisions, the outcome of which can affect everyone. Whether to downsize or remortgage, how much support to give towards university fees, or how to tackle debt, all these issues need input from the whole family unit.

A big one is whether to help one or more adult children or grandchildren onto the property ladder. About 45% of cash gifts given by grandparents are used for this purpose, OneFamily’s research revealed. Other popular reasons to give financial support are to help with education or training, monthly bills, and even holidays. Perhaps the biggest question is not ‘should we help?’ but ‘where will we get the money?’

Where does the money come from?

It’s natural to want to help family members, and grandparents in particular tend to be very generous. OneFamily’s research found that one in ten have given an adult grandchild a cash sum of £16,000 on average.

The majority said they gave this money as a gift with no strings attached. They also said it doesn’t require them to sacrifice their own financial wellbeing. About 40% fund these cash gifts from their own savings. But an increasing number of older homeowners are cashing in their property wealth to help younger family members using products like lifetime mortgages.

The Equity Release Council reported that equity release lending reached nearly £4 billion last year. This shows the increasing demand for this type of borrowing among homeowners.

OneFamily Advice offers advice on equity release. Watch the video below to find out more about whether our advisers think families should talk about big financial decisions such as considering a Lifetime Mortgage.

The impacts of financial decision making can last more than a lifetime

Equity release is a big decision which should only be taken after in-depth conversations within the family, and of course after taking professional financial advice. The reason for this is that, as with any form of equity release, it can have repercussions down the generations.

It’s good to talk

When you’re a family, you’re a team. It can be helpful to think about pooling your resources to improve the financial situation of everyone on that team. That’s not to say younger relatives should expect to be handed everything on a plate. But it does mean families should be willing to talk openly about money matters. Together, you should be much better equipped to find solutions to those big financial challenges.

Written by Hannah Smith - Financial Journalist

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don't rely on it when making financial decisions.

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