The best thing you can do for your children is to secure your own finances

published 29 August 2019

Pensioner shivering with cold next to old-fashioned stove © Getty Images — Generosity is fine but make sure you look after yourself too

You might be worried about the possibility of a global recession, trade war, or even Brexit. I'm worried about the Bank of Mum and Dad (BoMad). The latest report from Legal & General on the amount lent inside families to those wanting to get on the property ladder shows a huge transfer of wealth down the generations. In 2018 BoMaD lending came to £5.7bn. This year it is forecast to hit £6.3bn, with the average contribution knocking around £24,000. It isn't quite the same thing (most parents don't expect the money back), but on the numbers alone, this makes families the 11th-largest mortgage lenders in the UK.

The trend makes sense, of course: one of the reasons for rising wealth inequality in the UK (as everywhere) is that we are all living longer so wealth is trickling down more slowly than it has in the past. There's also nothing wrong with it: if you have spare cash why on earth not give it to your children to spend? As financial advisers like to say: there are no pockets in a shroud. The problem is that those who don't have spare cash are giving too finding it by downsizing, using equity release, cashing in pensions and, worst of all, taking out more debt themselves.

The result? Twenty-six percent of those who have lent or given money say they are worried they won't have enough to live on in retirement; 15% say they have already accepted a lower standard of living; 11% say they feel less secure. In a world where the state pension age is constantly shifting out, and so the number of people in receipt of it is shifting down (by about 300,000 in the last two years), this is miserable.

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It also isn't very sensible. As I think I might have asked here before, will your children really thank you if, as a result of your generosity now, they have to help finance your old age later? I doubt it. Perhaps the best present you can give them is not your own delayed retirement (6% have delayed retiring to finance giving), but your own financial security? You can't control global markets or economies. You can (to a degree at least) control this.

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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.