Helping your kids to buy a house increases inequality?

[stevensfo]

Not sure if this is the best board, but it is about families helping their kids.

Maybe I've got this all wrong, but if a family gives away capital to help someone, that must be reducing inequality, surely?

But....

https://uk.finance.yahoo.com/news/middl ... 00120.html

Middle-class homeowners are deepening inequality in Britain by passing down wealth to their children, a leading think tank has claimed.

Parents give away or loan around £17bn to their adult children every year, according to research from the Institute for Fiscal Studies.
Bee Boileau, of the think tank, said gifts from parents were “very unequally spread”, helping to “pass on inequalities from one generation to the next”.

It seems to be a case of damned if you do, damned if you don't.

Steve

PS What the hell is a 'think tank'? Can anyone set themselves up as one?

[pje16]

PS What the hell is a 'think tank'? Can anyone set themselves up as one?

A group of people who think they are important (delusions of grandeur)
So on those grounds if I donate to help Ukraine but not Turkey, is that unfair?

[CliffEdge]

Think tanks are extremists with charitable status. They were set up by the nobility to counter the effects of universal education in the population. It was feared that universal education would give the population the tools to think with. That fear has subsided. Nowadays think tanks are not needed as the population has the internet and social media instead of real life and rational thoughts. Definitive proof of their madness was provided by the success of the bold Brexit plan.

[Dod101]

In the sense that a think tank ought to be made up of reasonably intelligent people with plenty of time on their hands, set up to consider the problems of our age, they ought to be of some help. However the problem is that they tend to be made up of people with their own agenda to push, and on the whole best ignored.

As for inequality, the OP should not worry. The world is and I am sure always has been full of inequalities. Nothing that we do is going to change that much unless you want a Mao's China, and even that has not lasted long in the course of history.

Dod

[scotview]

The article says that the average size of loan or gift is £2000.

[tacpot12]

Steve, you are right. Transfering wealth from one generation to another is reducing inequality of one sort, but you can understand the argument that it perpetuates inequality of another. If those who were wealthy enough to give money away to their children were taxes more highly, and the money given to the poor, then it would reduce their inequality.

But given that the IFS is a right-leaning think-tank you have to wonder whether extra taxes would make it as far as the poor! And that's even before you consider how you can tax someone on their assets (and not their income) before they have a chance to pass these assets on. The IFS comment seems to me to suggest that they think that middle-class wealth (rather than income) should be taxed. This is a dangerous and slippery slope. The inheritance tax we already have to pay is an insult. We are taxed when we earn money, when we spend money, when we save money, and when we gain money though investing money. It's my view that what ever we have (legally) accumulated in our lifetime, in spite of the state, should be ours to do what we want with!

I would much rather see the tax we already pay used to properly educate children about money and work. One reason why the poor remain poor is that they were not taught about money and how to accumulate wealth or even the benefits of doing so. Sometimes they are even taught to be jealous of what other people have, and this can lead to criminality, where people think that they can just take (or damage) stuff because it is 'wrong' that other people have nice stuff. They are not taught that with hard work and some care, they could ALSO have these things. Their parents cannot teach them because they haven't learned these lessons themselves.

Some may say that the poor are poor because there are not enough well paying jobs, and that is certainly part of the jigsaw, but to be paid more, you have to be able to create more value. This is what we need to be teaching in schools - how to create value in society. But we also need to fix some problems we have about how value is perceived - is someone that cares for an elderly person in a care home doing something that is valuable? Of course, and they deserve to be paid a wage that reflects the care and effort that the work entails.

[DrFfybes]

Inequality is just the conentration of Wealth to a minority.

It is human nature to keep that wealth within the family to help further your progeny (don't mention the Selfish Gene ).
We have no children, so our money goes to our siblings' grandchildren. One side of the family probably won't need it, but we treat them all the same. OK, we do charity, and are a bit more generous for collections for weddings etc of people we know than we once were, but it is still concentrating the money in our social group.

So on those grounds if I donate to help Ukraine but not Turkey, is that unfair?

No, apparently that is Systemic Racism (according to our most woke relative). There is a point, most of Ukraine is white Christian, and it is easy to identify with them as fellow Northern Europeans. Many of the earthquake victims are Muslim, and "a bit dark skinned", so we don't identify with them as closely. Add in the history of wars and politcal unrest in the region, and certainly for the older generation there is already Sympathy Fatigue. Plus local Warlords criticising the West for not helping when the reason is they aren't allowed in because of the civil war doesn't endear them to us.

She may have a point, in the first week the DEC raised over £120m for Ukraine, about 4 times the amount raised so far for the earthquake victims. It would be interesting to know the support given to both causes from the OPEC countries who would more closely identify the the people in the earthquake region (and benefit financially from the war in Ukraine, but apparently that was cynical of me).

Paul (wondering if one relative's inheritance shouldn't go directly to charity in ouw will )

[Dod101]

Steve, you are right. Transfering wealth from one generation to another is reducing inequality of one sort, but you can understand the argument that it perpetuates inequality of another. If those who were wealthy enough to give money away to their children were taxes more highly, and the money given to the poor, then it would reduce their inequality.

But given that the IFS is a right-leaning think-tank you have to wonder whether extra taxes would make it as far as the poor! And that's even before you consider how you can tax someone on their assets (and not their income) before they have a chance to pass these assets on. The IFS comment seems to me to suggest that they think that middle-class wealth (rather than income) should be taxed. This is a dangerous and slippery slope. The inheritance tax we already have to pay is an insult. We are taxed when we earn money, when we spend money, when we save money, and when we gain money though investing money. It's my view that what ever we have (legally) accumulated in our lifetime, in spite of the state, should be ours to do what we want with!

I would much rather see the tax we already pay used to properly educate children about money and work. One reason why the poor remain poor is that they were not taught about money and how to accumulate wealth or even the benefits of doing so. Sometimes they are even taught to be jealous of what other people have, and this can lead to criminality, where people think that they can just take (or damage) stuff because it is 'wrong' that other people have nice stuff. They are not taught that with hard work and some care, they could ALSO have these things. Their parents cannot teach them because they haven't learned these lessons themselves.

Some may say that the poor are poor because there are not enough well paying jobs, and that is certainly part of the jigsaw, but to be paid more, you have to be able to create more value. This is what we need to be teaching in schools - how to create value in society. But we also need to fix some problems we have about how value is perceived - is someone that cares for an elderly person in a care home doing something that is valuable? Of course, and they deserve to be paid a wage that reflects the care and effort that the work entails.

As you will gather from my above comments, I am rather less optimistic about this than you are. There will always be 'the poor' and I doubt that anything we do will change that. That is not to say we should not be charitable but we cannot change society. Goes back to Biblical times.

Dod

[didds]

I haven't read the entire thread (yet!).

my first thought is parents providing funds for children to buy property is akin to parents providing funds for for children's education ie private education.

Whether one believes private education creates inequality [1] is probably indicative of whether one feels providing property funding creates inequality [1]


didds

[1] or not as the case may be

[Urbandreamer]

Some may say that the poor are poor because there are not enough well paying jobs, and that is certainly part of the jigsaw, but to be paid more, you have to be able to create more value. This is what we need to be teaching in schools - how to create value in society.

Ignoring Yahoo the original publication is here.

https://ifs.org.uk/publications/who-giv ... time-gifts

This article really is about "inequality" within groups by transferring wealth down the generations within a family group.

However, you mentioned education. Does having the ability to help your children with homework, buy education resources or pay for tuition increase inequality? Some would argue that it does, or at least maintains it.

https://ifs.org.uk/inequality/education-inequalities/

As a parent, I would have fought tooth and nail against any suggestion that my children's future be compromised or disadvantaged in order to reduce "inequality". Likewise, I see nothing wrong with giving my children money, though I can't help with housing costs.

Ps, I'd ignore the Yahoo article. If you follow the IFS link you will find that gifts for home ownership only slightly exceeds marriage gifts, but strangely Yahoo don't mention marriage at all.

[88V8]

Not sure if this is the best board, but it is about families helping their kids.
Maybe I've got this all wrong, but if a family gives away capital to help someone, that must be reducing inequality, surely?
But....

It would take a pretty perverse parent to give money to random 'poor' rather than their own kids.

Socialist claptrap.

V8

[Gerry557]

I was reading an article written by a think tank that thinks there are too many think tanks.

Unfortunately I'm guilty of continuing this inequality. It started a while back teaching them to swim when others couldn't. Then sending them to school with food when others didn't etc etc.

These people who go around earning their own money and spending how they please are ruining it for everyone. I've agreed to give mine to the next door neighbours kids now to ensure we don't fall into this trap.

They are doing the same but have a bigger swimming pool so I'm hoping the grandkids learn to swim at an even earlier age.

[stevensfo]

Thanks guys. Nice to see that I'm not the only one who thought that article rather strange.

Since we're not allowed to call ourselves an Institute (according to Wikipedia), I have just formed an 'Inequality Association' with my wife and dog.

As a respected Think-Tank (the dog respects us), we propose that tax rates be reversed and on a sliding scale from 0 - 100%, so the less you earn, the more tax you pay. This would encourage those on low wages to study and work harder.


Steve

PS For those with no sense of humour, that was a joke.

[JohnB]

Modern economies seem very good at making wealth distribution more unequal. If you care about inequality (and many don't) you need mechanisms to reverse that. Your options are taxation, business regulation, and encouraging philanthropy. In a global society its somewhat easy for wealth to avoid being taxed, and easier still to avoid business regulation, and tax breaks for charity don't seem to do much.

Giving money to the poorest in India will create more happiness than giving it to your children, but we don't, business doesn't and neither the UK or Indian governments do either. We all live with that on our consciences.

[BullDog]

Should I feel bad? I have two grown kids who both had their four year university degree course and expenses paid including a year studying abroad all paid for. Both have a small mortgage free home bought by me. Both have a new car bought by me. Both have self invested pension accounts seeded by me. The inequality I have generated must be appalling. But then, my kids generation are sure to be the very first generation growing up in this country who will be less well off than their parents. That's absolutely certain.

It used to be called doing your best for your kids.

[Lootman]

Modern economies seem very good at making wealth distribution more unequal. If you care about inequality (and many don't) . .

I don't care about it because it is a fake problem.

If someone wants to be concerned about poverty, then fair enough. They can study it, or volunteer in a soup kitchen or food bank, or give to various charities. All fine.

But when the issue of poverty gets framed as "inequality" then that is an overt attempt to make the issue not about the poor, but rather about the rich. That pivot snidely implies that the problem is not that some folks are poor, but rather that some people are successful. And that in turn implies a war on wealth and the wealthy - always a popular theme with socialists.

"Inequality" is envy masquerading as compassion.

PS: I sent my kids to private school, had them mostly use private healthcare and gave them 140K each to buy their first home. Not sorry.

[Dod101]

Should I feel bad? I have two grown kids who both had their four year university degree course and expenses paid including a year studying abroad all paid for. Both have a small mortgage free home bought by me. Both have a new car bought by me. Both have self invested pension accounts seeded by me. The inequality I have generated must be appalling. But then, my kids generation are sure to be the very first generation growing up in this country who will be less well off than their parents. That's absolutely certain.

It used to be called doing your best for your kids.

Bl***y H**l. Don’t let my kids read that! I helped my kids but did not set them up for life.

Dod

[BullDog]

Should I feel bad? I have two grown kids who both had their four year university degree course and expenses paid including a year studying abroad all paid for. Both have a small mortgage free home bought by me. Both have a new car bought by me. Both have self invested pension accounts seeded by me. The inequality I have generated must be appalling. But then, my kids generation are sure to be the very first generation growing up in this country who will be less well off than their parents. That's absolutely certain.

It used to be called doing your best for your kids.

Bl***y H**l. Don’t let my kids read that! I helped my kids but did not set them up for life.

Dod

Well, I figured they needed their inheritance up front rather than later when I'm gone. Far better for them to have it while young rather than live hand to mouth in debt while the money sits festering in my hands. And if I didn't give it to them up front it's quite likely the government would charge IHT on it later. So, everyone is better off having done what I did. I was extremely fortunate the latter years of my working life, neither of my kids will likely ever come close to earning what I did.

[stevensfo]

Should I feel bad? I have two grown kids who both had their four year university degree course and expenses paid including a year studying abroad all paid for. Both have a small mortgage free home bought by me. Both have a new car bought by me. Both have self invested pension accounts seeded by me. The inequality I have generated must be appalling. But then, my kids generation are sure to be the very first generation growing up in this country who will be less well off than their parents. That's absolutely certain.

It used to be called doing your best for your kids.

Bl***y H**l. Don’t let my kids read that! I helped my kids but did not set them up for life.

Dod

Well, I figured they needed their inheritance up front rather than later when I'm gone. Far better for them to have it while young rather than live hand to mouth in debt while the money sits festering in my hands. And if I didn't give it to them up front it's quite likely the government would charge IHT on it later. So, everyone is better off having done what I did. I was extremely fortunate the latter years of my working life, neither of my kids will likely ever come close to earning what I did.

To be honest, if I'd read this when I was much younger, I would have strongly disagreed.

However, apart from the absurd obsession with house prices in the UK, having seen that not only is our IHT allowance a small fraction of that enjoyed by our US friends (Why?), it has not kept pace with inflation and to be honest, is pretty pathetic.

Steve

PS The seven-year gift rule means I'd probably have to cut down on the G&Ts and start doing that thing I thought was illegal..... exercise!

[Lootman]

I figured they needed their inheritance up front rather than later when I'm gone. Far better for them to have it while young rather than live hand to mouth in debt while the money sits festering in my hands. And if I didn't give it to them up front it's quite likely the government would charge IHT on it later. So, everyone is better off having done what I did. I was extremely fortunate the latter years of my working life, neither of my kids will likely ever come close to earning what I did.

apart from the absurd obsession with house prices in the UK, having seen that not only is our IHT allowance a small fraction of that enjoyed by our US friends (Why?), it has not kept pace with inflation and to be honest, is pretty pathetic.

PS The seven-year gift rule means I'd probably have to cut down on the G&Ts and start doing that thing I thought was illegal..... exercise!

So if the government is concerned about "inequality" then maybe it should abolish IHT, thereby deterring all these lifetime gifts to kids?

PS: In the US nobody with 325K is considered "rich". That starts at about 10 million, hence the 8-figure nil-rate band for US estate tax.

The UK has a very odd idea about what is "rich".