Cost of living crisis drives early inheritance gifting

The rising cost of living is cutting into even the most resilient saving pots and salaries, forcing many to re-consider their financial priorities, whatever their generation or income.

Those millennials now turning 40 are facing very different challenges to when their parents were the same age; however, there is equal pressure on parents to step in and support where they can without eating into their own retirement funds.

Help with living costs
New research shows the impact of rising living costs on inheritance and retirement planning. Over a third of parents to 40-year-old millennials think they will need to give inheritance support to their children this year to help with immediate living costs[1].

After previously spending inheritance on property and starting a business, nearly all (94%) 40-year-old millennials would use any inheritance received now to help with living costs. As the eldest millennials turn 40 years old, the research shows parents are considering gifting them their inheritance early to increase support for living costs this year.

Further rising inflation
With the Bank of England’s warning of further rising inflation, over a third (37%) of parents of 40-year-old millennials now anticipate gifting their inheritance this year to help their children more with immediate living costs, as opposed to bigger purchases like property.

The research also highlighted that almost two in five (38%) parents also expect to be more flexible in their support across the rest of this year, giving money early when needed rather than planning ahead.

Savings and investments
More than three in four (76%) 40-year-olds have already received some form of inheritance from their parents, with the majority putting this to use in savings and investments (30%), setting up their own business (20%) or buying their first property (18%).

However, if they were to receive that same inheritance this year, nearly all (94%) said they would use more of it on living costs – including bills, daily travel, food, clothing and healthcare. Of these, nine in ten (92%) earn £55,000 and over.

Increasing financial support
For those 40-year-olds who are set to receive an inheritance in the future, using the funds on living expenses (18%) comes second only to putting this into savings and investments (31%), showing the impact of the cost of living on financial priorities.

This research on parents of 40-year-old millennials showed that despite the cost of living and rising inflation, the majority (85%) are confident they will have enough to support their whole retirement.

However, over half of parents (57%) are worried Inheritance Tax will have a significant impact on their final estate due to increasing financial support for their children.

Source data:
[1] All data, unless otherwise specified, is taken from 2,000 consumers who turned 40 in 2021, who will turn 40 this year or who will turn 41 this year; and 2,000 parents of consumers who turned 40 in 2021, will turn 40 this year or will turn 41 this year. The 2,000 parents of consumers all had assets of at least £1m, including property. The 2,000 40-year-old millennials are already investors, or have considered investing their money. Data gathered July 2022. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.