The average age for a UK adult to become a parent is 29.8 years old. By this point, most people should have at least a basic understanding of how to look after their finances.
They should be contributing to a pension. Some will be diligently saving into ISAs in the hope of becoming an “ISA Millionaire” in the future. Business owners should have structured their income to include salary and dividends to save tax. And for those of us who don’t have this option, there are always tax-efficient investments such as Venture Capital Trusts to consider.
If any of the above is news to you then we need to talk. Now.
But my question to you is: Where did you learn this?
Anyone who has read my previous articles knows there is no love lost between me and the UK educational syllabus. We teach children methods to calculate long-division in a world where there is no extra credit for those who don’t use calculators. We then send children off to work without a basic understanding of sound financial practices.
So, if we don’t learn it from school, maybe we learn it from our parents? I’d argue that many people would say no.
In the UK, talking about money is still one of those taboo subjects. In a recent study, only 22% admitted being willing to talk about finances with friends or family – in fact, money beats sex, weight, and political beliefs as the most taboo subject for people. Consequently, most people stumble through life picking up fragments of information as they go – but their knowledge doesn’t get passed down the generations, leaving children to start afresh, just as you did.
It’s time to shake off our fear of talking about money for the greater good.
This is becoming ever more important in a world where financial support from parents is projected to increase further. Already, over a quarter of first-time buyers relied on the ‘Bank of Mum and Dad’ in some capacity, making the unofficial banking institution one of the largest mortgage lenders in the country.
Parents are increasingly setting up university savings and pension savings for their children. This funding has been coined as the ‘Great Wealth Transfer’ and is estimated to exceed £30 trillion – that’s £30,000,000,000,000 – by the end of the decade. Much of this money will be inherited by people who have little or no understanding of what to do with it next.
To add to this, a poor understanding of the UK tax system may make the situation even worse when passing assets on to future generations. Currently, Inheritance Tax is set at 40% of your estate in the UK – after an allowance of £325,000 per person (yes, there are other allowances and exemptions – but it gets complicated – so just humour me with this), a big price for any generation to pay and something that could be avoided altogether with prudent financial planning.
At Foresight we take a holistic approach, often looking at families’ finances encourage over 3 generations, ensuring that money passes down the generations tax efficiently.
So, now is the time to start talking about money. Ignorance is not a strategy and not a default position. Building up knowledge over time and between generations creates real wealth that lasts, and although money does not necessarily bring happiness, the lack of money definitely brings misery.
If you would like to talk about your money, then please get in touch and one of our Wealth Strategists would be pleased to discuss your financial situation and the options available to you and your family.