Care costs rise as families balance elder support with helping the next generation

Rising costs for later-life care are forcing families to balance helping relatives with preserving their own futures. A survey by Octopus Money finds that about half of adults would like to help family members financially, but worry about paying for care costs later in life. Specifically, 45 per cent of people cited funding their own living costs and care as the reason they are holding back gifts.

Among those balancing the two aims is Janie, a 60-year-old who told This is Money she wants to ensure her children have the best future while also supporting them onto the property ladder. 'Like most parents, I want to give my children what support I can. For me, that means helping them get onto the property ladder and moving up it as their families grow,' she said. 'Childcare is also really expensive, often young families have little choice in the matter and both parents have to work.' Taking financial advice, she says, has helped her understand the risks and benefits of investing. 'I've started investing, something I had never done before. I've opened a stocks and shares ISA and, while I used to be very risk-averse, I'm now much more comfortable after having everything explained clearly.' 'Alongside that, I've built up multiple income streams - I currently work across four jobs, including my own divorce coaching business, which is giving me more security and independence.' Janie added: 'I don't plan on retiring any time soon, and by combining earning, saving and investing, I increasingly feel more able to help my children while also securing my own future in the hope that I will not burden them when I'm old and falling apart.' Taking financial advice, Janie says, has helped to understand the risks of investing, but also the benefits of doing so. 'Speaking to [my adviser] has helped me understand that risk doesn't have to be frightening if you're informed and making decisions that suit your circumstances. I've gone from metaphorically keeping money under the bed to actually investing it, and now I feel more like I'm in control of my finances.'

Care costs can be steep. One in seven independent nursing homes now charge more than £1,800 per week, LaingBuisson figures show. The average yearly cost, according to Octopus Money, is about £80,000. People with assets worth more than £23,250 have to fully fund their own care, and others will have to contribute to their care costs unless their assets are worth less than £14,250. These thresholds were set back in 2010. As a result, older people often need considerable sums to fund later life care, especially if they face being in care for a long period of time. This means that many older people are choosing to hold on to their money, with 67 per cent of adults planning to make gifts saying they would like to give more but are worried about their future expenses. Some 60 per cent of those planning to make gifts said they are setting money aside for care costs.

Kristian Manton, chartered financial adviser at Octopus Money, said: 'Pensions remain the most accessible source of funds for paying care fees and, outside of property, they are typically people's largest asset. Immediate needs annuities can also help. But increasingly, families are having to sell property to fund care, and without proper planning, these costs can quickly eat into inheritances, leaving the next generation with far less than expected.'

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We can see the great wealth transfer on the horizon, but it’s not all rosy for younger generations — we’re actually looking at a perfect storm of uncertainty if families don’t talk to each other about what they are planning to gift, and what they might leave in their will. We can also see that younger generations expect to rely on parental gifts or inheritances to fund major life events, including buying homes.

Looking ahead, younger generations say they are increasingly reliant on receiving financial help and a future inheritance from their parents to pay for life's milestones. As many as 60 per cent of Gen Z and 56 per cent of millennials who are set to receive gifts or an inheritance say they are relying on them to meet their life goals, including half who say they need them to buy a home. According to Hargreaves Lansdown, 32 per cent of people say they need an inheritance to fund their retirement.

Janie says she is not planning on retiring anytime soon and is balancing earning, saving and investing to reduce the risk of becoming a burden. 'I don’t plan on retiring any time soon, and by combining earning, saving and investing, I increasingly feel more able to help my children while also securing my own future in the hope that I will not burden them when I’m old and falling apart.' She credits financial advice with helping her understand that risk can be managed when decisions fit personal circumstances. 'Risk doesn't have to be frightening if you're informed and making decisions that suit your circumstances.'

Looking ahead, experts warn that without proactive planning, the costs of care could erode families' wealth and expectations. Manton says pensions remain a central lever, but families should clearly discuss gifting plans, caregiving costs and wills to navigate the coming years with less surprise and less risk of breaking intergenerational trust.