The UK population is set to increase by 3 per cent between 2015 and 2020, with the over 65s expecting a 12 per cent increase, over 85s at 18 per cent - and centenarians by a huge 40 per cent. While it’s good news that we can enjoy a longer-life expectancy, it also means that many of us may find ourselves caring for older parents for longer and, at the very same time, trying to help our grown-up offspring find their feet in the world.
Thanks to high property prices and job insecurity, ONS (Office of National Statistics) figures show the number of young adults in the UK aged 20 to 34 sharing a home with their parents is at its highest since records began 20 years ago. With annual care-home fees rising by an average of £900 in the last year, how do you strike a financial balance between your parents and your children? Start with these tips:
1. Do your research
If you plan to help your parents or older relatives with the cost of care, ensure you’re involved in discussions from the outset and be honest with them. It goes without saying that you want what’s best for them, but you need to watch out for potential warning signs. For example, they may insist on a cheaper, unsuitable care option if they think you can’t afford it, or be in the dark about the key care elements they need. The more research you’ve done into the different options and the closer you’ve examined your finances at the early stages, the better. Read our guide to covering care home fees and finding the right care home.
2. Monitor your finances and make adjustments
One of the biggest effects of care is lost time. If you have to stop working five days a week or you can’t keep the long hours, high-stress job you had before, that’s going to affect your finances, so you’ll need to alter your outgoings. Get a financial plan and make sure you adjust quickly to any change in circumstance. Five years of overspending by £500 a month at age 50 – instead of investing the money in a pension – means you’d miss out on £85,000 extra in your retirement fund (based on 7 per cent investment growth and retirement at 65 and being a basic-rate taxpayer).
3. Teach your children the basics of personal finance
While you may have less control over your relatives’ care-home costs, you can help your children to be good with their money, to help you be good with yours. The best behavioural step you can take to try and help your children is to set them up with the right habits; everyday things like being careful what you spend and not wasteful.
The most important building block of personal finance is compounding. This is the mechanism by which financial cost and benefits grow. If their investments are left alone they will eventually grow to many times the value of their initial stake. Similarly if they are in debt and the interest rate is too high this can quickly balloon into a big problem. Use our tips to help children understand money.
4. Be brutal with your outgoings
With extra money being paid for care, and perhaps subbing your children money from time to time, the quickest thing you can do to offset this is cut any unnecessary expenditure. That means searching for the best utility deals regularly, removing any subscriptions that you don’t use, and even tiny things like checking out the reduced aisle at the supermarket, or taking a packed lunch to work. Search for cheaper utility bills here and cheaper broadband, tv and phone deals using Yours Switching.
5. Reduce your tax bill
Another way to cut costs is to ensure you don’t pay more tax than you need to, as there are plenty of legitimate ways to do this. For example, there is no tax on capital gains from ISAs, making them a standard vehicle for investing in shares. Or what about the Marriage allowance whereby, since 6 April 2016, married couples and civil partners can transfer £1,100 of personal allowance from the lower earning partner to the higher earner, saving them up to £220 tax (this is only available if the higher earner is a 20 per cent taxpayer - no transfer is possible is they are a 40 per cent taxpayer).
Thanks to Guy Myles, CEO of next-generation financial advisers, Flying Colours
- For more money-saving tips, pick up the latest copy of Yours magazine