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My son wants me to invest my pension in his new business idea. He can now deduct a 25 per cent lump sum tax-free from his pension, he says it’s easy for me to do.
I want to support him, but I’m worried about running out of money in my later years and I don’t want to live in poverty.
RG Cheltenham
Money psychotherapist Vicky Reynal responds: It can be very difficult to say no when someone we love asks us for support. We don’t want to let them down, disappoint them; We might even be afraid that they will be angry with us. So sometimes we give money (or other things, for that matter) because it’s too hard for us to say no, but then we regret our choice when we feel the cost of our decision.
What would be the real cost to you then?
As you weigh this, don’t just think about the money, but what the money means to you, namely: the emotional cost. What would it be like to live with the uncertainty of not being able to cover the costs of a good enough quality of life?
Vicky Reynal advises: Don’t just think about the money, but about the emotional cost for you
Think of the anxieties that come with that. Money is linked to our survival and living with the reality of not having enough to cover basic expenses can trigger very raw and primal fears.
Living with that stress has both emotional and physical consequences; In fact, studies have shown that financial stress takes a physical toll. It is important that all of this is taken into account when evaluating the disadvantages of giving more than you can afford.
But don’t just think in binary terms: you and him. There is a third element to consider: the relationship. It would be easy to assume that if you give him money, he will be happy, you will avoid conflict, and that’s a good thing. However, the reality is that the relationship could suffer later due to the high cost you are paying for it.
If you were to give him more money than you are comfortable with, this will likely have an impact on your relationship: you could be very angry with yourself and with him, if you find yourself in real financial need.
So while turning down money may not be the “best” thing for him, it might be the best thing for your long-term relationship if, hopefully, he can understand your reasons for saying no and get over the natural disappointment this might cause.
If you’ve weighed everything and still want to say no, I suggest you put this all together in one conversation. He acknowledges that he might be disappointed but that, after much thought, he has decided that contributing to the company would put him in a precarious financial situation.
You can emphasize that you hope your relationship is not negatively affected by this decision and that withholding your investment doesn’t mean you don’t believe in your business idea. But your decision has to do with the impact on your finances and, as a result, your well-being.
If your child is a good salesperson, you could try to convince him of the financial advantages and potential benefits of the investment. However, the reality is that the benefits are not guaranteed and he would still be taking a risk with his money that could be uncomfortable for him.
Do you have any questions for Vicky Reynal? Email vicky.reynal@dailymail.co.uk