At a time when financial pressures are increasing, a new report by M&G Wealth shows that a growing number of families and couples are shying away from financial discussions with each other. 

As the cost-of-living crisis bites, one in five adults surveyed are now too embarrassed to discuss their finances with close relatives, and 20 per cent hide their finances from their family, an M&G Wealth report reveals.

M&G Wealth’s Family Wealth Unlocked report, launched this week and in its third year, looks at the changing shape of intergenerational financial planning in the UK. It examines the financial habits of 2,000 UK adults aged over 18 who personally use or have a family member who uses, a financial advisor.

According to the report, long-term finances could be affected by having fewer conversations; the research found that individuals are not planning ahead and could be missing out on finding financial help.

The report found that since the start of the cost-of-living crisis more people are unwilling to discuss their finances and are hiding worries or money from their loved ones.

In particular, a fifth of adults who use a financial advisor are hiding their finances from their family, while one in five now say they are too embarrassed to discuss their finances, up from 14 per cent in 2022, the report reveals.

Only half of respondents in a couple talk openly about their finances with their partner, a drop from 69 per cent who said they did so in 2022. Almost a quarter said they wouldn’t discuss their finances with anyone in their family, the report shows.

In fact, respondents are more likely to seek advice from financial websites or online search engines than from their partner or parents, it adds. Nearly four in 10 people surveyed have reduced savings and investments' contributions because of the cost-of-living crisis, with an additional quarter expecting to do so before May 2024.

“Discussions about money have always varied between families, but our research suggests that openness between generations is taking a hit in this current cost-of-living crisis. In an environment when everyone is feeling the pressure, it is important that conversations about money start at home,” Kirsty Anderson, savings expert at M&G Wealth, said.

“Our data shows an increase in the amount of family gifting between generations, with older family members less likely to wait to pass on money through inheritances. Gifting can work out as a tax-efficient measure to help younger family members deal with life events or daily financial challenges, from buying a house or paying for a wedding, to just to helping them to manage their day-to-day bills.  Encouraging conversations at home about financial affairs, or seeking professional financial advice, could help to unlock solutions for those struggling,” she continued.

“The research shows that financial advisors are in a good position to facilitate these conversations within families, as a growing number of people are now sharing their advisor with other family members,” she added.

Inheritance Impacts
Family communication is particularly important for those expecting to inherit funds from their relatives. For those planning ahead or in need of immediate funds, families are starting to look more at gifting as a tax-effective option to help loved ones, the firm said.

Three quarters of respondents have received some money from parents for a life event or to help with ongoing costs, while 56 per cent have received money from grandparents. The number of people who said they had not received any gifts has decreased from 23 per cent to 16 per cent year-on-year, the firm added.

Some of the most popular items being gifted from parents include money for a wedding, a house deposit, or to help with bills and 11 per cent say their parents have gifted them money for their savings and investments.

With freezes to the inheritance tax (IHT) threshold and research showing that a greater number of people are planning to leave inheritances due to the cost-of-living crisis, the number of people having to pay IHT is ticking up, with an additional £1 billion being claimed by the Treasury this year. 

However, the report shows that nearly three in 10 of those individuals who are due to inherit from their parents are yet to plan for it. Without financial planning, they could potentially miss out on tax efficiencies and fail to maximise their capital, the firm continued.

The cost-of-living crisis has impacted many people's planned inheritances – for both better and worse. The amount of inheritance that respondents are expecting to receive has increased for over a third of respondents. One in 10, however, think they will be receiving less than they had previously expected, the research shows.

The survey, commissioned by M&G Wealth, was conducted by Opinium Research from 16 to 26 May 2023. It surveyed 2,000 UK adults (18+) who have personally, or who have parents, or grandparents, who have received financial advice from an advisor in the last five years.