Typically early inheritance gifting tended to be used for bigger purchases such as buying a property, but research from Barclays has revealed the effects of rising living costs on inheritance and retirement planning.

It found that two in five parents also expected to be more flexible in the support offered to adult children over the course of 2022, giving money early when needed rather than planning ahead.

Three quarters of 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%), starting up their own business (20%) or buying their first property (18%).

However, if they were to receive the inheritance money again this year, 94% said they would use more of it on living costs, including utility bills, daily travel, food, clothing and healthcare.

This is despite nine in 10 of the respondents earning £55,000 and over.

Inheritance tax woes and more portfolio reviews

The survey of 2,000 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, as well over half (58%) expect to dip into their retirement pots to support their children more throughout the rest of their lifetime given the rise in cost of living.

To help manage their finances, four in five have increased the frequency of reviewing their investment portfolio in the last two years, with one in four doing so once a month, and one in five doing so every two-three weeks.

For those parents who have already been financially supporting their children more in their lifetimes, the main motivating factors have been a desire to help their children build up their own wealth now (32%), to be more tax efficient (30%), and to help them buy their first property (27%).

Smaller sums, more tax efficiency

Clare Francis, director of savings and investments at Barclays Wealth, said: “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.

“Passing down smaller, more frequent sums of money in a lifetime can be both tax efficient and give beneficiaries more flexibility, but the long-term must be considered as well: both in terms of comfortably funding a whole retirement, as well future family milestones. It has always been important that families talk about financial planning with each other and their financial adviser, yet the impact of rising inflation makes having these conversations early even more crucial.”