Helping Your Children And Grandchildren Avoid Being Part Of The Stagnation Generation
By Stuart Downey
Back in 2016, the Resolution Foundation published a report entitled ‘Stagnation Generation’, declaring that my generation, the millennials (“under-35s”), could be the first generation to earn less than our parents’ generation. It does not make for good reading, and the report paints a gloomy picture for millennials (a term I much prefer to the Stagnation Generation). For example:
- A millennial is said to be 50% less likely to own their own home by the age of 30 in comparison with their parents;
- Or put another way, millennials will have likely spent £25,000 more on rent than (the previous generation) “Generation X”;
- Millennials earned £8,000 less in their twenties than Generation X workers.
In my opinion, there are many things that have led to the situation we now find ourselves in, but a few things in particular that have changed during my lifetime that I believe have accelerated the change. Some of these we have felt the full impact of already, some are starting to hit and some we still have in store:
- The Financial Crisis of 2007-2008 led to a strain on the jobs market, government spending cuts plus a long and ongoing period of austerity. As many of my generational peers entered the jobs market, at the point when wages were expected to rise at their fastest, they have entered a very tough environment.
- The cost of education (both private school and university fees) has risen. Students can now leave university with more than £40,000 of debt by the time they enter the job market.
- House prices (on which we have written about previously) mean that, in many parts of the country, without help, finding a deposit for that first home can be difficult. By the age of 30 my generation are 50% less likely to own their own homes than their ‘baby boomer’ parents, according to the report.
- Looking to the future and retirement prospects look a lot worse, with the retirement age going up and likely to keep on doing so. We are more likely to work for years longer than our parents, have less property related wealth and face much higher pension costs.
I do not want to paint a picture of doom and gloom, and I also would not agree with the opinion that there is a split between generations. “The Bank of Mum and Dad” (and Grandparents) is alive and well. More and more of our clients are looking to help children and grandchildren, and at earlier points in their lives. Their view is often that their children (and grandchildren) need the money more than they do and the earlier they can help them in their lives the bigger impact they can have. Imagine helping a 20 year old son or daughter get on to the London housing ladder in this market, or perhaps entering the workplace free of debt as opposed to leaving them the same money when they are much older.
It is something many parents would like to do if possible, but you need to appreciate that the timing and method of those gifts is critical otherwise you or your children may face an unexpected tax bill. You also need to consider your circumstances and your requirements for the future. However, by implementing successful estate planning for your children, not only will you benefit their lives, but hopefully you can reduce the amount of tax payable as well.
We would be happy to meet with you to discuss your circumstances and the estate planning options available to you.
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