This is one of the most common things we see in people who are otherwise excellent with money. Comfortable, sensible, well past worrying about themselves — and spending well beyond their means propping up an adult child who shows no sign of needing it less.
It almost always starts somewhere reasonable. A deposit. A month's rent between jobs. A car so they can get to work. Nobody sets out to fund a second household indefinitely.
The question that actually separates help from harm
Worth knowingNot “can I afford it?” — that question has bankrupted a lot of generous people. The question is: will this contribution solve a problem and leave them stronger, or will it create a dependency?
Money given to get someone over a genuine, bounded thing is help. Money given repeatedly to soften consequences that would otherwise teach something is not, however kindly meant.
Put a number on it before you decide anything
Almost nobody in this situation knows the annual figure. It leaves in dribs and drabs — a standing order here, a shop paid for there, the phone contract nobody ever moved across — so it never presents itself as one number, and a number is the only thing that changes the conversation.
Take an illustrative couple, both 58, both planning to stop work at 66. They send their 31-year-old £450 a month, cover a £95 phone and insurance bill, and put roughly £55 a month of shopping on their own card. That is £600 a month, or £7,200 a year. Over the eight years to state pension age it is £57,600, before anything the money might otherwise have earned.
Now set that against their own gap. Suppose their pensions and State Pension are on track to cover £26,000 a year and they want £33,000 — a shortfall of £7,000 a year. The support is not costing them a bit of comfort. Every year they fund it, they are handing over slightly more than a full year of their own retirement shortfall. That is the sentence that tends to land, and it is arithmetic rather than opinion.
Do the same sum with your own figures. Pull twelve months of statements, highlight everything that goes to or for that child, and total it. If you want to see it against the rest of your money, put both versions — with the support and without — into the survival budget calculator.
Gift or loan? Decide, then write it down
Most family money moves with no record at all, which is why so many families end up with two honest and incompatible memories of it: one side remembers a gift, the other remembers a loan. A signed, dated paragraph saying which it is, how much, and what — if anything — is expected back costs nothing and settles it permanently. Do it at the time. Nobody has ever successfully written one of these afterwards.
Two things follow from which one you pick:
- If it is a deposit for a mortgage, the lender will ask for a gifted deposit letter confirming the money is a gift, is not repayable, and buys you no stake in the property. If it is genuinely a loan, it has to be declared as one, because it is a commitment against their affordability. Describing a loan as a gift on a mortgage application is not a grey area.
- If it is a loan you would never actually chase, call it a gift. A loan that everyone privately knows will not be repaid is the worst of both: it creates no discipline and quietly poisons the relationship anyway.
On tax, the rules are more generous than most people assume. Each tax year you can give away £3,000 in total under the annual exemption, and carry an unused annual exemption forward one year only. On top of that you can give £250 to as many different people as you like. Wedding or civil partnership gifts are exempt up to £5,000 to a child, £2,500 to a grandchild and £1,000 to anyone else. Regular payments have their own exemption with no cap at all, provided they come out of your normal income and you can still meet your usual living costs after making them — which is exactly the test the £600 a month above may well fail.
Anything beyond those exemptions is a potentially exempt transfer: no Inheritance Tax if you live seven years. Die sooner and it counts against the £325,000 nil-rate band. Taper relief is the part people get wrong — it only reduces tax on gifts above the nil-rate band, and it runs 32% off at three to four years, 24% at four to five, 16% at five to six and 8% at six to seven. Keep a dated list of what you gave and when; your executors will otherwise be reconstructing it from bank statements.
The part nobody thinks about: your own care
If you later need care and the council assesses what you can pay, it can look at money you gave away. This is called deprivation of assets, and there is no fixed number of years it can look back over — the test is about intent and timing, not a deadline. The council has to show that you knew you were likely to need care and support, that avoiding the cost was a significant reason for giving the money away, and that you would have been expected to contribute. Giving money to your children while fit and well, for reasons that have nothing to do with care, is ordinarily not deprivation. Giving it away shortly after a diagnosis is a different conversation. If a council does decide against you, it must give its reasons and you can challenge it, ultimately through the Local Government and Social Care Ombudsman.
Help that does not create dependency
Stopping does not have to mean withdrawing. It means changing the form:
- Match what they save rather than replace what they spend. A pound from you for every pound they put away, capped at a figure you name, rewards the behaviour you actually want. Open-ended top-ups reward the opposite.
- Fund a bounded thing with an end date. A qualification, a driving course, a deposit on a flat that lowers their rent, career coaching. It finishes, and the finish is the point.
- If they are saving towards a first home, gifting money they then pay into their own Lifetime ISA turns £4,000 a year into £5,000, because the government adds 25% up to £1,000 a year. They must open it before they turn 40 and can pay in until 50, and the home has to cost £450,000 or less. The catch is real: take the money out for anything other than a first home, age 60, or terminal illness and there is a 25% withdrawal charge, which can leave them with less than they put in. It suits a genuine house deposit and nothing else.
- Pay for help rather than for outcomes. A session with a money coach, or a free appointment with MoneyHelper, StepChange or National Debtline, deals with the reason the money keeps running out.
Why it is so hard to stop
Usually guilt. Parents who were working flat out when the children were small often carry a sense of having not been there, and money is the available currency for that. Some inherited the pattern from their own parents and simply assume it is what you do. And once the giving has already produced a bit of entitlement, the most common reaction is not to stop — it is to feel responsible for the entitlement and give more.
How to actually stop
- Set a date. Not a warning, a date. Years of “this is the last time” have taught them it is never the last time.
- Say it once, clearly, in advance. Write down what you are going to say and say that. This conversation goes badly when it is improvised in the middle of a request.
- Offer a different kind of support. Paying for career coaching, or a session with a money coach, is help that doesn't create dependency.
- Tell someone else the plan. Maintaining the boundary is the hard part, and it is much easier with one other person who knows what you agreed.
Because this conversation goes wrong when it is improvised, here is a version worth adapting rather than inventing one under pressure: “We've added up what we've been sending and it's more than we can keep doing if we want to stop working at 66. From the first of April we're going to stop the standing order. That isn't a punishment and it isn't about anything you've done. What we can do instead is match anything you save, pound for pound, up to £100 a month, and we'll pay for the course if you want to do it.” Three parts: the number, the date, and what replaces it.
Expect it to go badly for a fortnight and fine after three months. The wobble is not evidence that you were wrong.
And if the money is going to something bigger than bad luck — addiction, gambling, coercion — that is not a budgeting question and we would say so in the room. GamCare is free on 0808 8020 133.